Money pool investing refers to a group of investors pooling their money together to invest in assets or securities. This allows small investors to invest in assets that require large capital outlays. There are different money pool investing strategies that can be adopted. In this article, we will look at some examples of money pool investing strategies.
Investing in hedge funds through a fund of funds
A popular money pool investing strategy is investing in a fund of hedge funds. This allows individual investors to invest in hedge funds that normally require high minimum investments. The fund of funds pools money from various investors and invests in a portfolio of hedge funds and other alternative investments. This provides investors exposure to multiple hedge fund strategies and managers through a single investment. Some examples of fund of hedge funds are Blackstone Alternative Multi-Strategy Fund and SkyBridge Multi-Adviser Hedge Fund Portfolios.
Real estate syndications
Real estate syndications allow groups of investors to pool capital to invest in large real estate projects like apartment complexes, office buildings, shopping malls etc. This allows investors with smaller capital to invest in institutional-grade real estate. The syndication sponsor sources the deal, while investors contribute the equity capital required. Profits are distributed to investors based on the ownership percentage. Some examples of real estate syndicators are CrowdStreet, Cadre and Fundrise.
Angel investor groups
Angel investor groups bring together high net worth individuals to invest in early-stage companies. Each investor contributes a smaller amount that is pooled together to make larger investments in startups. This allows angels to diversify their investments across multiple startups. Angel investor groups like New York Angels and Golden Seeds allow individuals to benefit from the group’s deal flow, experience and networks.
Investment clubs
Investment clubs are typically groups of individual investors who pool their money to invest in stocks, bonds and other securities. This allows members with limited capital to access investments like mutual funds and ETFs. Club members research investment opportunities and decide collectively where to invest the pooled capital. Profits and losses are shared proportionately among members. Examples are BetterInvesting investment clubs and The National Association of Investors Corporation (NAIC) clubs.
Money pool investing allows individual investors to access investments with high capital requirements. Some common examples are fund of funds, real estate syndications, angel groups and investment clubs.