Master-feeder fund structure
Also known as: feeder fund
A master-feeder fund structure is an arrangement in which several smaller feeder funds each pool investor money and then invest that pooled money into one larger master fund, which holds the actual underlying of securities. Investors buy shares of a feeder fund, not the master fund directly, but their money ultimately ends up managed as part of the single combined at the master fund level.
This structure is common when a fund manager wants to offer the same investment strategy to different types of investors under different terms, for example one feeder fund built for US taxable investors and a separate feeder fund built for tax-exempt or foreign investors, each structured to suit that investor group's needs. Both feeder funds still ultimately invest in the exact same underlying master fund , so investors in either feeder are exposed to identical holdings and performance before accounting for each feeder's own fee layer.
The main advantage of pooling into one master fund is operational efficiency and scale, trading, custody, and management only need to happen once at the master fund level rather than being duplicated separately across each feeder. This structure is common among and some institutional strategies, and while it is largely invisible to an everyday retail investor, it can appear in a as a structural detail worth understanding when the fund's are described as flowing through to a separate master .