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, 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 Multinational Corporation forms a captive fund to hedge against currency fluctuations by Investing in foreign exchange contracts tailored to its operational needs.