Captive Fund
Captive Fund: A captive fund is a type of investment fund that is established to manage and invest Capital primarily for the benefit of a single parent organization or a group of related entities. These funds are often set up by Corporations or institutions to achieve specific financial goals, such as Risk Management, Liquidity, or Capital-appreciation/">Capital Appreciation, while retaining more control over their investments compared to traditional external funds.
Examples:
- A large insurance company may create a captive fund to invest premium income in a diversified portfolio to ensure stable Returns and meet future policyholder obligations.
- A university may establish a captive fund to manage its endowment, allowing it to invest directly in real estate and other alternative Assets to achieve higher Returns.
Cases:
- Case 1: A pharmaceutical company sets up a captive fund to invest in biotech startups, allowing it to directly support innovations that could lead to future products.
- Case 2: A Corporation/">Multinational Corporation forms a captive fund to hedge against currency fluctuations by Investing in foreign exchange contracts tailored to its operational needs.