Capped Fund

Capped funds are just what they sound like...funds with a cap on them. No, these aren't the funds that are balding and want to hide it. It means there's a cap on expenses being charged to the investors holding shares in that fund.

Investment companies charge the people they handle investments for. It's like a participation fee, or the fee the management company collects for offering its expertise to the investor. Picture the investor as the queen asking for a favor from the management company Rumpelstiltskin. This fee setup specifies exactly what the fees will be, and keeps the investment company from collecting a boatload of extra fees and the first-born kid too (unless your kid is in the Terrible Twos and you'd like him to live with Rumpelstiltskin for a bit...totally up to you).

Capping the expenses outlines a fee schedule of sorts, so the investor knows exactly what they are paying and why, and also sets up a process where the company has to seek approval from its management board in order to change the fees. Once it's approved, the investors are notified of the change and have the option to leave the company (and their Stiltskin-like ways).