Collective Investment Fund

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DEFINITION of 'Collective Investment Fund'

A fund that is operated by a trust company or a bank and handles a pooled group of trust accounts. Collective investment funds combine the assets of various individuals and organizations to create a larger, well-diversified portfolio. The following are two types of collective investment funds:

A1 Fund: A fund of grouped assets contributed by either the holding bank or affiliated banks for the exclusive purpose of investment and reinvestment.

A2 Fund: A fund of grouped assets contributed by pension, profit sharing, retirement, or other trusts that are exempt from federal income tax

INVESTOPEDIA EXPLAINS 'Collective Investment Fund'

The idea of a collective fund is to lower costs through economies of scale by combining pensions and profit-sharing funds. These pooled funds are grouped into what is known as a
master trust account under the control of the bank, which acts as trustee, guardian, executor or administrator.

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