The term capital return refers to the part of the return from an asset that is delivered purely through change in the price of that asset. As such, capital return excludes any income that has been delivered by that asset (when income is included in the return calculation, it is known as the total return).
For example, if you invest £100 in a fund and by the end of the first year its value has increased to £108, then the capital return for that period will be 8%. If the fund also delivered £2 of income during that year, that would equate to a yield of 2% on the original £100 invested. Including that extra 2% of income in the return calculation gives a total return of 10% (8% capital return + 2% income return = 10% total return).
For any asset that delivers a reasonable income stream, such as an equity income fund, the difference between capital and total return becomes very significant over long periods of time. That is the magic of compounding – Einstein’s eighth wonder of the world.