What is a Commingled Fund?

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  • Written By: Geri Terzo
  • Edited By: A. Joseph
  • Last Modified Date: 20 September 2019
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One way for small investors to place capital with a professional money manager is to invest in a commingled fund. Similar to a mutual fund, in which a portfolio manager pools capital from multiple investors into one fund and makes investment decisions accordingly, a commingled fund combines investment capital from investors in multiple funds into one account. There are benefits associated with commingled investing, such as increased diversification, but there also are some drawbacks.

An investor who places future retirement capital in an investment vehicle such as a 401(k) plan should know the way those funds are divided. This is because there are key differences between a commingled fund vs. a mutual fund, and not knowing could cost money in the end. Commingled funds and mutual funds have some major similarities, and this is why there could be room for confusion.

Both types of funds are overseen by professional investment advisers who make trading decisions on behalf of investors. Each adviser might invest in multiple asset classes, such as stocks, bonds and currencies across various regions. This is what they are paid to do — retain and grow wealth over a period of time and offer diversification to investors that they would not be able to achieve on their own.


A commingled fund, however, is not open to individual investors. Unlike a mutual fund, the only way that an investor can gain access to a commingled fund is through a retirement plan such as a 401(k) plan. Additionally, regulation of these two types of funds varies. In the United States, for instance, the mutual fund industry is governed by the Securities and Exchange Commission (SEC). Mutual funds lay out an investment strategy in legal documents that are filed with financial regulators in a region so investors are aware of the risks and rewards that are likely with a fund.

Managers of U.S. commingled funds are not regulated by the SEC, however. Instead, these investment advisers adhere to less-stringent guidelines and are overseen by the U.S. Office of the Comptroller of the Currency or by a state banking authority. As a result of looser governance, mangers of commingled funds have to disclose fund performance and the components of a portfolio only once a year, although most fund managers communicate performance to investors on a more frequent basis. Mutual fund managers are required to disclose performance on a more frequent basis.

A benefit to investing in a commingled fund surrounds cost. Since an investment adviser of a commingled fund combines capital of investors from multiple funds, the cost ratio declines for the fund manager and, subsequently, for investors. This translates into lesser fees and potentially greater profits for investors.


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