What is a Blind Pool?

A blind pool describes when a limited partnership raises funds from investors without telling them where the money will be invested.

Funds for blind pools are often solicited from the public. They can usually purchase the shares in question at relatively low prices, given the risks associated with such investments.

Funds can also be raised from partners, who may only have a broad idea about the category the general partner plans to put their money into, such as tech or real estate.

Typically, investors have the opportunity to conduct detailed research into a company or an asset they are considering investing in. In a blind pool, however, all investors can only research the reputation, as well as the past successes — or failures — of the person managing the blind pool.

History of blind pools

Blind pools have been associated with questionable trading since the South Sea Bubble of 1720. During this period, London’s stock market overheated in an investment mania that spread to Paris and the Netherlands, then collapsed. Blind pools were among the companies to crash and burn, taking the savings of even small investors with them.

Blind pools typically gain popularity during hot markets, when investors are willing to take a chance on investments sight unseen. They are willing to take on such a risk as they feel so confident that the market is doing well that they can’t possibly lose.

In 1986, the Los Angeles Times reported on an outbreak of blind pools selling for as little as $0.05 a share. Here is an excerpt of the newspaper’s report:

“With the surge in stock market prices luring investors to buy almost anything that resembles an equity, securities authorities say that these issues, most of which reach market through brokers in Denver, Salt Lake City and other places where penny-stock trading is concentrated, have been proliferating wildly.”

Blind pools are also associated with the so-called corporate raiders of the 1980s, such as Michael Milken and his disciples. Milken and others raised blind pools as large as $1.2B. They did so with the purpose of buying out companies, selling off their assets at a profit, and then using the shell of those companies to buy even more of them.

But by 1990, Milken’s investment banking firm Drexel Burnham Lambert went bankrupt and publicly traded companies had developed defenses against such hostile takeovers. The 1980s mania that included blind pools had finally come to an end.


Blind pools have a range of uses. For example, managers of blind pools can leverage their flexibility to jump from investment category to investment category faster than more defined investment companies can.

Blind pools can also be used to take a private company public, without the long and expensive process of filing with the SEC for an initial public offering (IPO).

For example, a blind pool can first sell shares to raise money to acquire a private company. It can then engineer a reverse takeover of the public blind pool company, which is then dissolved. This would leave the target company in place as a public company.

The process is not devoid of scrutiny, however. The now-public company would still need to meet SEC requirements for reporting its financial performance, among other requirements.

Blind pools also exist in the world of real estate investing. They range in scale, from family and friends pooling money in order to purchase distressed properties, to professional investors raising funds to purchase stocks (such as the publicly traded Pebblebrook Hotel Trust).

The next generation of blind pools

In the early 21st century, a successor to blind pools emerged — special purpose acquisition companies (SPACs). Described as “blank check” companies, SPACs have many of the same features as blind pools. For example, they raise funds for an unnamed purpose. They also require a high degree of trust in the fund managers, but with more protections for investors (such as the opportunity to back out once an acquisition target is identified and disclosed).

Like blind pools, SPACs grow in popularity during a bull market. For example, in 2005, before the crash and the 2008 global financial crisis, Barron’s stated the following:

“Over the past two years, investors have snapped up $2B worth of shares in a new breed of blank-check stock offerings. It's the return of the blind pool, gussied up with a nicer name — the special-purpose acquisition company, or SPAC.”

In the current economy, where Main Street has been hit hard by Covid-19 lockdowns, shutdowns, and restrictions on business activities, the stock market has managed to soar. For instance, the Dow closed on July 1, 2020 at 25,734, and by June 30, 2021, it had climbed to 34,413.

The SPAC version of blind pools is still making headlines, with Forbes noting in 2020:

“SPACs have raised over $20B so far this year … setting records for the number of deals and amount raised… Last month, hedge-fund manager Bill Ackman raised a $4B SPAC, the largest ever. The resulting deals are getting attention too; Draft Kings used a SPAC structure to go public in April as did Virgin Galactic SPCE -14.3% in late 2019. Both have seen positive returns since.”

With a long and enduring history, blind pools appear to be not going anywhere. Before investing in one, make sure to do your own research to ensure you understand both its possible benefits and drawbacks.