What Are Pooled Equity Funds?

A pooled equity fund is when a group of investors pool their money together to make an investment that they otherwise individually could not fund themselves.  With pooled funds, groups of investors can take advantage of opportunities typically available to only large investors.

The reason investors will commonly choose to pool their money to diversify their investments and to invest in larger scale projects that they could not afford to buy into on their own.  Pooled equity funds will have a dedicated fund manager or group of managers who are in charge of investing the funds to turn a profit on behalf of the investors.

The big downside to this type of investment is that the individual investor will lose control of the specific investment in which their funds are used to make.  Their money will now be tied up with a group of individuals generally unknown to them who will now be their partners in that investment.  If the deal goes bad, getting you money back can be a challenge as the individual investor will only have a small percentage stake along with a lot of other individuals who will all want their money back.  Some pooled equity funds must reach a consensus before making an investment.  Decisions do not have to be unanimous and investments can be purchased that are not in the best interest of an individual investor.  It is also common for funds to have a management fee that will be charged quarterly or annually.