What is 'Commingling (Commingled)'

Commingling (commingled), in securities, is the combining of assets or customer-owned securities in a single investment vehicle.

BREAKING DOWN 'Commingling (Commingled)'

Commingling combines assets contributed by investors into a single fund or investment vehicle. Commingling is a primary feature of most investment funds. It may also be used to combine various types of contributions for various purposes. Below are some examples of investment commingling.

1. If you deposit a paycheck into an inheritance fund, the paycheck would not be considered separate funds but part of the inheritance fund. Thus, the paycheck is no longer considered separate property from the inheritance.

2. In investment management, it is the pooling of individual customer contributions into a single fund, a portion of which is owned by each contributing customer. Commingled funds are managed to a specified objective. A commingled fund structure is used for mutual funds. It is also used to manage institutional investment funds.

Benefits of Commingling

Commingling investors contributions into a single fund is a structure that has been used in investment management since the first mutual funds were launched. Commingling allows a portfolio manager to comprehensively manage the investment contributions into the portfolio to a specific strategy. Using pooled funds allows fund managers to keep trading costs down since trades can be executed in larger blocks. The commingling of investor contributions does require fund managers to maintain certain positions in cash in order to account for the transactions of the commingled shareholders.

Mutual funds and institutional commingled funds are two of the most popular commingled funds in the investment market. Any vehicle that commingles investor contributions for a specified investment goal can be considered a commingled fund. Other types of commingled funds include exchange-traded funds, commingled trust funds, collective investment trusts and real estate investment trusts.

Standard record keeping allows operational teams to monitor and regularly report fund positions to investors. For mutual fund investors, daily price quotes allow an investor to know their exact position in a mutual fund as a percentage of the fund’s total managed assets.  

Illegal Commingling

In some cases, the commingling of funds may be illegal. Details of an asset management agreement are typically outlined in an investment management contract. An investment manager has a fiduciary responsibility to manage assets according to certain specifications and standards. Assets agreed to be managed as separate cannot be commingled by the investment advisor.

Other situations may also arise where contributions provided by an individual or client must be managed with special care. This can occur in legal cases, corporate client accounts and real estate transactions.

  1. Commingled Trust Fund

    A commingled trust fund combines assets under a joint investment ...
  2. Collective Investment Fund

    A fund that is operated by a trust company or a bank and handles ...
  3. Conduit IRA

    A conduit IRA is an account used to roll over funds from a qualified ...
  4. Investment Fund

    An investment fund is the pooled capital of investors that enables ...
  5. Closed To New Accounts

    When an investment vehicle is no longer accepting new investors, ...
  6. Pooled Funds

    Funds from many individual investors that are aggregated for ...
Related Articles
  1. Financial Advisor

    4 Signs Your Financial Advisor Is Ripping You Off

    Pay attention to the habits of your financial adviser to avoid him ripping you off by commingling, churning, scamming or embezzling your money.
  2. Financial Advisor

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  3. Financial Advisor

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
  4. Investing

    When To Buy A Mutual Fund

    Doing a little research can help you find out if mutual funds are a good fit for your portfolio.
  5. Financial Advisor

    How to Rate Your Mutual Fund Manager

    What to really look for when you're deciding on a mutual fund.
  6. Investing

    Should You Follow Your Fund Manager?

    Learn how to tell if a fund in flux is still a suitable investment.
  7. Financial Advisor

    5 Secrets You Didn’t Know About Mutual Funds

    Learn five of the "secrets" about mutual funds that can have a significant impact on mutual fund choices and investor profitability.
  8. Investing

    The 4 Best American Funds for Growth Investors in 2016

    Discover four excellent growth funds from American Funds, one of the country's premier mutual fund families with a history of consistent returns.
  9. Financial Advisor

    This Is How Much Mutual Fund Managers Make

    Learn about the high-paying salaries of mutual fund managers and the low level of transparency in income reporting by mutual fund companies.
  1. When do you invest in a commingled fund vs. separate account?

    Explore situations when a commingled fund is a more suitable investment vehicle than a separate account. Read Answer >>
Hot Definitions
  1. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  2. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  3. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  6. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
Trading Center