Pooled Investments

Pooled Investments
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As with all investments, pooled investments does come with a certain level of risk however it does offer the potential for both capital growth and/or income. A pooled investment is one that allows an individuals money to be invested alongside others in order to allow a much larger, professionally managed portfolio of assets - often running into the hundreds of millions of pounds. Due to the fact that the portfolio is spread over a wider set of assets, the investments carry significantly less risk than those that hold a small amount of assets. \r\n\r\nOften referred to as ‘collective investments’ are handled by professional fund managers who use a variety of investment vehicles to spread this risk and generally choose from the main asset options such as shares, bonds, gilts, property and various other specialised areas, for example hedge funds (discussed in a separate article). These funds are actively managed and the fund manager spends each day researching the various financial markets and purchases and sells various assets in order to provide good returns for it’s investors. \r\n\r\nPooled investments often target a variety of investment aims based on either specific geographic locations (for example China, India, other emerging nations) or certain industry sectors (for example technology). Some nations often have a slight bias towards their own market (for example English funds would operate predominantly on the London Stock Exchange) and reflect national self-interest according to policymakers, familiarity and the minimal risk associated with foreign exchange. These funds are generally chosen on the basis that of these pre-determined aims, their previous investment performance and various other minor factors such as fees. \r\n\r\nThe primary advantage of pooled investments, as discussed earlier, is the much smaller level of risk due to the fact that the assets are diversified. An investment in one particular equity may do well however it may also drop significantly or even collapse altogether for whatever reason. If a fund had invested entirely in that particular equity, they could have lost all of the money invested within the fund. However, by investing in a diverse range of equities or securities, the capital risk is decreased significantly. \r\n\r\nEach individual fund has a specific investment target to define the remit of the investment manager and to assist investors see if that particular fund is right for the return they are looking for. The investment target is generally considered to be in one of two categories - income (or value) investment or growth investment. Income/value investment generally consist of funds that choose shares with high income potential, typically the more well established companies. Growth investment on the other hand involves the choosing of shares that generally reinvest their dividends in order to accelerate growth. As both of these investment theories have received criticism in the past, several funds operate a combination approach, blending the two together.

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