Capped Fund

DEFINITION of 'Capped Fund'

A mutual fund that has a limited amount of operating expenses that can be charged annually to shareholders. The limit is expressed as a ratio of total operating expenses divided by the fund's average net assets. The fund's investment advisor will disclose the expense limit in the prospectus.

BREAKING DOWN 'Capped Fund'

Limiting the expense ratio of a mutual fund provides investors with a fee ceiling. While the cap provides investors with the highest fee to expect, the cap can also be removed by the fund manager. The fund's prospectus will often state when the expense limit will expire or change. The expense limit can be measured with either the before or the after reimbursement expense ratios.

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RELATED FAQS
  1. When is an expense ratio considered high and when is it considered low?

    Discover what is considered an exceptionally high or low expense ratio for a mutual fund or ETF, and learn why this figure ... Read Answer >>
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    Learn what an expense ratio is, and whether mutual funds, closed-end funds and exchange-traded funds can have negative expense ... Read Answer >>
  3. Why is a mutual fund's expense ratio important to investors?

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  4. What information should I focus on in my mutual fund's prospectus?

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  5. Do mutual fund trading costs hurt your bottom line?

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