Master-Feeder Structure

A master-feeder structure is a fund arrangement in which multiple feeder funds collect capital from different investor groups and invest that capital into one master fund.

The main purpose is operational concentration. The manager can run one underlying portfolio while still using separate feeder vehicles for tax, regulatory, or distribution reasons.

Structure

The setup has two layers:

• feeder funds that accept investor subscriptions
• a master fund that executes the actual investment strategy

Each feeder owns an interest in the master fund, and investor returns are determined by the master portfolio after fees and expenses are allocated back through the structure.

Why It Matters

This structure is widely used in alternative investments because it helps managers:

• centralize trading
• keep one investment book instead of several parallel ones
• separate domestic and offshore investors
• tailor investor access without rebuilding the strategy each time

Main Tradeoffs

Master-feeder structures can improve efficiency, but they also add legal and administrative complexity. Investors need to understand which risks and fees sit at the feeder level and which sit at the master level.

Related Terms

• Feeder Fund: Vehicle that channels capital into the master fund.
• Private Investment Fund: Common broader category for structures that use master-feeder arrangements.
• Hedge Fund: Frequent real-world use case for this structure.
• Offshore Mutual Fund: Adjacent cross-border fund concept, though not the same structure.