Pooled funds are funds that involve multiple investors who contribute assets and hold them jointly as a group. In a sense, a pooled fund is similar to that of a mutual fund, in that the assets contained in the fund are managed as a single unit. Sometimes referred to as a commingled fund, the pooled fund is an effective means of structuring pension funds and other types of employee investing programs.
One of the best examples of a pooled fund is known as the unit trust. Unit trusts are investment companies that deal only with a fixed unmanaged portfolio that is composed of a wide range of income producing options and securities. Shares of the trust are sold to outside investors. As is true with many examples of the pooled fund, the unit trust is not actively managed. This is in contrast to mutual funds, which are actively managed.
A pooled fund is an excellent option for an investor who wishes to contribute assets and then not have to be concerned with managing the investment in any way. Contributors to a pooled fund receive regular reports on the status of the growth or loss associated with the securities that make up the fund. In the event that the investor becomes unhappy with the growth trend of the pooled fund, it is usually easy to sell one’s interest in the fund and seek opportunities elsewhere. Exceptions to the ability to sell would include participation in a pension fund.
Generally, a pooled fund is structured to include a number of securities that are considered very stable and therefore very low risk. As can be expected, this also means that the return from the securities is small but steady. Because this arrangement of commingled funds does not tend to produce a large amount of profit in the short term, the pooled fund is best suited for investors that prefer secure investments that over a long period will produce an equitable return that can be utilized in later years.
