Commingled Trust Fund

A commingled trust fund combines assets under a joint investment management strategy. Commingled trust funds represent a pool of assets that are jointly managed by the same entity. These funds can be from several sources, such as trusts and retirement plans.

Commingled trust funds, regulated by the U.S. Office of the Comptroller of the Currency (OCC) or the state banking authority, are usually offered by banks and trust companies. The Securities and Exchange Commission (SEC) does not regulate these funds. Investors may also refer to a commingled trust fund as a collective investment trust.

Professional money managers and pension consultants often pool the assets of various trusts and funds together to manage them jointly. This can be done when there are congruent investment objectives of each source of funds. Commingling the funds allows for greater efficiency and lower costs. (For further reading, see the Q&A: When do you invest in a commingled fund vs. separate account?)

Commingled trust funds are similar to mutual funds in that they get managed by professional money managers and invest in stocks, fixed income securities and other assets. The main point of difference is that commingled trust funds are not available to all investors, whereas mutual funds are. This type of fund is only available to investors in specific employer-sponsored retirement plans.

Due to low overhead costs, commingled trust funds are cheaper to invest in than similar alternative investment options, such as mutual funds. The ability to manage combined assets in a single fund creates cost efficiencies that help to reduce reporting and administration fees. Marketing expenses are minimized, as commingled trust funds are not publicly traded and usually target a smaller group of investors. Because these funds are not regulated by the SEC, compliance costs are also kept low.

As the SEC doesn't regulate commingled trust funds, investors may find it difficult to obtain detailed information about them. For example, it may be difficult to check if a fund has had any regulatory breaches. Most financial research companies offer limited coverage of commingled trust funds, which makes it challenging to track performance. Assets in these funds are accessed differently, which may prevent a traditional rollover if an employee leaves their employer.

Before investing in a commingled trust fund, investors should seek professional advice to ensure it fits their financial situation.