Pooling of Investments. If an organization accumulates substantial investments in its various funds, pooling may be advisable. Pooling of investments is the process of combining the investments of various funds into one group or pool to provide greater flexibility at lower cost and to provide diversification to spread the risk. Once pooled, individual investments lose their identity as to fund.
Each contributing fund merely maintains in its investment account an amount representing its portion of the pool. Before any additions or withdrawals may be made, the fair value of the total portfolio must be determined. Realized gains and losses (and unrealized, if investments are carried at fair value rather than cost) are allocated to each participating fund on the basis of its share of the total fair value at the previous valuation date. The proportion of each fund’s fair value may be expressed in terms of units or in terms of percentages of the total. The latter method is more flexible which shows changes in pooled investments over a period of time.
Each contributing fund merely maintains in its investment account an amount representing its portion of the pool. Before any additions or withdrawals may be made, the fair value of the total portfolio must be determined. Realized gains and losses (and unrealized, if investments are carried at fair value rather than cost) are allocated to each participating fund on the basis of its share of the total fair value at the previous valuation date. The proportion of each fund’s fair value may be expressed in terms of units or in terms of percentages of the total. The latter method is more flexible which shows changes in pooled investments over a period of time.