Pooling-of-Interests
Categories: Accounting
Aggregating. Throwing in cash together. Partnering.
Pooling interests in an investment simply refers to two or more players getting together to invest their money in whatever form.
Mutual funds are a pooled investment. So are index funds. Hedge funds. Bond funds. ETFs. REITs. MLPs.
And yeah, pretty much every other investment vehicle that can scale to allow for 2...or 20...or 2 million investors to all come together and…invest.
Why would people want to do this?
Scale. Or rather, synergies of costs from scale. Whether you have 1 investor or 10,000, you need to file papers. And there are usually lawyers involved. And accountants. And other Wall Street-y gadflies.
And the marginal additional cost of servicing 10,000 pooled investors is only slightly more than servicing one…so, in many cases, pooling makes a lot of sense when investors’ interests are generally aligned.
And when they’re not...there’s, uh...trouble. Everybody out of the pool.