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Commingled Fund Definition
A commingled fund is a type of fund that comprises asses from various accounts, the assets are blended together to create this type of fund. A commingled fund can also be called a pooled fund, it contains assets from several funds pooled together.
A commingled fund offers an investor many advantages such as reduction in the management costs of running several accounts separately. This type of fund also enhances diversification of the portfolio. A commingled fund can also mean an investment vehicle that cannot be accessed by individual or retail investors because this type of investment is not publicly listed.
A Little More on What is a Commingled Fund
A commingled fund has the attributes of a mutual fund since both funds comprise of assets pooled together from various investments. Professional fund managers handle commingled and mutual funds, these funds are invested in financial instruments such as bonds and stocks.
The major difference between commingled funds and mutual funds are highlighted below;
- The Securities and Exchange Commission (SEC) regulates mutual funds while commingled funds are not regulated.
- A Commingled fund use a Summary Plan Description (SPD) to relay the details of the funds while mutual funds use prospectus.
- Commingled funds can be reviewed by state regulators of Office of the Comptroller of the Currency in the United States while mutual funds are subject to review by SEC.
Pros and Cons of Commingled Funds
The advantages of a commingled fund include its lower fees and expenses as well as a reduced operating costs given that the fee is charged on the pooled funds rather than individual accounts. This fund is also managed by a professional fund manager allowing it benefit from economies of scale, which lists trading costs. A commingled fund is also good for diversification of investment which reduces the overall risk of a portfolio.
Despite the numerous benefits of a commingled fund, it has some disadvantages. A major downside of this fund is its illiquid nature. These funds are not publicly traded and are therefore not available to individual retail investors. Further, the absence of regulation on commingled funds by SEC makes the funds non – transparent and difficult to track.