How does a captive fund work?
A captive fund is designed so that employees and companies can invest in more exclusive types of investments. Since a pool of employees can put up more money toward an investment than any one employee alone, together, they can purchase substantial ownership in interesting private companies by buying into their employer's captive fund.
The only real caveat with captive funds is that since they do have a captive audience, the shares that any employee owns can only be sold back to the fund rather than being sold on a secondary market at potentially more than the current value. Otherwise, captive funds are a great way for employees to take advantage of professional investment help without having to do anything more than contribute to the fund.
Who invests in captive funds?
Captive funds serve two main functions: They allow employees of a company to invest in assets they would never be able to invest in otherwise, and they allow companies to buy and hold ownership in other companies as an investor.
Both existing and former employees of a company that offers captive funds can be invested in them, though usually only current employees can continue to add to that investment. Both can sell their shares, though.
Corporations can also invest in captive funds, but it's a very different situation for them. Instead, their captive funds, whether they allow employees to invest in them or not, hold shares of other companies that the corporation wishes to invest in to help grow its value and create dynamic partnerships.
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