A capital fund is a pool of money set aside or raised to finance the acquisition, construction, renovation, or maintenance of long-term physical assets such as buildings, land, equipment, or infrastructure. It is used by organizations or businesses to support capital projects and infrastructure developments that help the entity grow or sustain its operations over the long term. Capital funds can come from various sources such as borrowing, government grants, fundraising campaigns, or investments from equity holders and lenders. This fund typically finances fixed assets and is intended for purposes beyond daily operational costs, often involving significant financial commitments and long-term investments.
In private equity, a capital fund (also called a buyout fund) acquires already established companies lacking necessary capital to realize their full potential, often using leveraged buyouts where part of the acquisition price is financed through debt, reducing risk and enabling larger acquisitions. The fund may then restructure or manage the company actively to increase its value before selling it for profit.
Thus, "capital fund" can refer broadly to financial resources allocated for long-term physical assets, or more specifically to investment funds used in acquiring and growing established companies.
