What Is a Captive Fund?
A captive fund is a private pooled investment fund that is managed for a select group of investors or in connection with a single entity. It is frequently made for the benefit of an organization's individuals or a firm's employees. These funds are "captive" since they are limited in who can invest and in their transferrability. For sure, investors in a captive fund can cash out by selling shares back to the fund individuals or administrator.
Captive funds can likewise be made by companies to oversee targeted investments, for example, venture capital assets invested in private market companies.
Captive Funds Explained
Captive funds are not publicly offered or traded on exchanges. In this manner, they normally don't get a great deal of media consideration. Nonetheless, these funds can be made with a broad scope of objectives, large numbers of which can be very like publicly traded funds. Captive funds are many times developed as an employee benefit considering investment from some or the company's all's employees relying upon its benefit concentration and structure. Captive funds can likewise be utilized for overseeing venture capital investments.
What makes these funds "captive" is the failure to sell fund shares to any other person yet back to the fund itself. At the end of the day, investors in the fund can't sell or transfer their holdings to some other individual or entity outside of the fund's limits. Frequently these limits are limited by certain individuals from an organization or firm.
Captive funds can be managed inside by designated trustees, or they can likewise be managed by an institutional investment manager. As non-registered private funds, captive funds have broad scope in their organizing and investment objectives and are subject to less regulatory oversight.
Captive funds for employees look to broaden the employee benefits at a company. Captive funds can be like Z-share funds, which are regularly utilized by mutual fund companies permitting employees to invest in a single share class of the portfolio. The Medallion Fund for Renaissance Technologies employees is one illustration of an employee captive fund.
The Medallion Fund is an unbelievable capital fund invested in by the employees of Renaissance Technologies. Established by James Simmons, Renaissance Technologies is a hedge fund zeroed in on quantitative investing. The company has 290 employees with $84 billion in assets under management starting around 2018, including the Medallion Fund. Different funds incorporate the Institutional Equities Fund and Institutional Diversified Alpha Fund. The Medallion Fund involves its own proprietary quantitative investing strategy for the Fund and is notable for keeping one of the most amazing histories for returns in investing history.
Venture Capital Captive Funds
Many companies lay out captive funds to build partnerships and make private market venture capital investments. Funds are typically upheld by corporate capital and can be managed and structured in different ways.
Alphabet, Inc., has a captive fund portfolio managed by Google Ventures. Google Ventures is a subsidiary of Alphabet, Inc., zeroed in fundamentally on dealing with a broad investment portfolio that looks to invest in developing technology companies.
Healthcare is one more sector that is associated with venture capital funding and research. Healthcare companies with captive funds for venture capital investing incorporate Eli Lilly and Company, Takeda Pharmaceutical Company, Biogen, and Ascension Health.
- These funds can participate in an extensive variety of investment strategies or objectives, yet are restricted in that fund shareholders can buy and sell from inside the fund itself.
- A captive fund is a privately managed pooled investment vehicle organized for an organization's individuals or employees.
- Captive funds are additionally utilized by corporations to invest in private positions or venture bargains.