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What is a Capital Investment Fund?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 27 October 2016
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    Conjecture Corporation
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A capital investment fund is a type of group fund that allows investors to combine assets for the purpose of providing financial support to emerging businesses. As with any type of investing, the goal of participating in this type of group is to earn some sort of return from the capital investments. In many instances, a capital investment group or fund will provide what is known as patient capital, meaning the money invested with a given business venture often has very liberal repayment terms that provide ample time for the new business to become established and generate profits.

It is not unusual for a capital investment fund to focus on a specific type of business as part of the general operating strategy. For example, a fund may choose to target business operations that are geared toward the development of alternative energy. In this scenario, the investors participating in the fund would be able to select different companies that manufacture equipment used in solar energy or wind energy production. Within the scope of the green alternatives, a fund of this type may also consider construction companies that specialize in the use of recycled or alternative building materials for the creation of new housing.

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The specific structure of a capital investment fund will vary greatly, depending on any governmental regulations that apply to the creation of this type of fund and the stated goals of the fund’s founders. Typically, a capital investment fund will be governed by a board of directors who work closely with a fund administrator. Reporting mechanisms are put in place, allowing investors to constantly be aware of the current status of the investments managed by the fund. Investors may also vote when it comes to the election of board members and the appointment of an administrator.

As with any type of investment opportunity, a capital investment fund may be a prudent approach to generating returns, assuming that the investments are researched properly and the investments remain sound. For this reason, investors who are thinking of participating in this type of fund should investigate the background of the fund and its officers before making a decision. In addition, verifying the performance of the current roster of investments held by the fund is also a good idea. Proceeding with participation in a capital investment fund should only take place if the investor is satisfied with the amount of anticipated return in relation to the risk assumed.

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