Commodity pools, also known as managed futures funds, allow smaller investors to participate in trading commodities and futures options. They spread risk and allow for larger investments, but are a gated, private investment opportunity.
Commodity pools are funds that receive contributions from various investors for the purpose of participating in the trading of commodities and futures options. Sometimes referred to as managed futures funds, the commodity group shares some characteristics with mutual funds, but operates differently. A commodity group is a great way for smaller investors to come together and participate in a larger investment.
As with mutual funds, investors who choose to participate in a commodity group are able to participate in trades that would not otherwise be within their reach. This makes using a product pool especially attractive to smaller investors who cannot meet the margin requirements that often apply to larger investments. By contributing resources to a common pool, the group of investors can get around the margin requirements that would apply to the individual investor and qualify to trade based on their cumulative financial strength.
Along with the ability to participate in trading larger investments, a commodity pool also helps spread the degree of risk among multiple investors. Limiting the degree of risk helps ensure that if the investment does not turn out as planned, investors will still be able to cover the loss without great difficulty. While it is true that the return on investment will be shared by all parties, the benefit is often substantial enough to make the effort of investing through a commodity pool well worth it.
There is another way that the commodity pool is different from a mutual fund. Mutual funds are open to public participation. A commodity pool is a gated investment opportunity that is considered a private venture involving a carefully selected group of investors. No one can join a product group without the express approval of the other members.
A commodity pool is an investment approach that is often used by a small group of investors who want to work together to build their investment portfolios. Family corporations sometimes use a commodity group as a component of the overall investment strategy, with only family members eligible to participate.
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