DEFINITION of 'Commodity Pool'
A private investment structure that combines investor contributions to be used in the futures and commodities trading markets. The commodity pool, or fund, is used as a single entity to gain leverage in trading, in the hopes of maximizing profit potential. The title "commodity pool" is a legal term as set forth by the National Futures Association (NFA). Commodity pools in the United States are regulated by the Commodity Futures Trading Commission (CFTC) and the National Futures Association, rather than by the Securities and Exchange Commission, which regulates other market activity.
Also called "managed futures funds."
BREAKING DOWN 'Commodity Pool'
Commodity pools are similar to mutual funds in that the investors' assets are pooled in order to make trades that would not be possible for each individual investor. The investor's risk is limited to the amount of his or her contribution to the commodity pool. Many hedge funds – private pools of activity managed capital – are commodity pools, and are registered with the Commodity Futures Trading Commission as commodity pools and Commodity Trading Advisors (CTAs).