What Is a Capped Fund?

By Jeremy Bowman – Updated Sep 11, 2025 at 2:25 AM EST

Key Points

Capped funds limit operating expenses and individual stock holdings to ensure diversification.
Understanding capped fund rules is crucial; they can vary and expense caps may expire.
Capped funds provide fee transparency but may restrict fund managers' flexibility compared to non-capped funds.

If you prefer to invest in funds rather than individual stocks or bonds, there are a lot of different ways to do it. Fund managers also have different options for how to structure the fund; one is to make it a capped fund. The cap refers to a limit on expenses or individual holdings within the fund.

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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