DEFINITION of 'Distribution Reinvestment'

A process whereby the distribution from a limited partnership, real estate investment trust (REIT) or other pooled investment is automatically reinvested into common units or shares in a fund, often at a discount to the current market price. Investors can set up distribution reinvestment plans with the partnership itself, or with a broker through which the units are held.

Also known as a DRIP, but not to be confused with dividend reinvestment plans (also called DRIPs), which are found in many large-cap stocks and mutual funds. Most distributions are done quarterly, but some may occur on a monthly basis.

BREAKING DOWN 'Distribution Reinvestment'

Investors who participate in these programs also generally have commissions and other fees waived, making it an advantageous and affordable way to grow their investment. Meanwhile, the financial managers have a stable way to grow assets with current investors.

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