Feeder Fund – Master Fund

A feeder fund is a common special purpose entity (SPV) utilised to raise capital or subscriptions from investors into a centralised vehicle known as a master fund. Separate investment vehicles, also known as feeders, are established for each group of investors.

The feeder funds invest their assets into the master fund which is then responsible for making all portfolio investments and/or conducting the investment trading activity.

Feeder funds investing in the same master fund have the option of choice and variation which means that they may differ in:

• Investor type: eligible investor or institution or qualified or per country
• Fee structures: management fee, distribution fee, performance fee, carry interest or other types of fee structure
• Investment minimums: which can vary depending on the investor (public, retail or professional or the size of their investment or the period of commitment, etc)
• Net asset values
• and various other operational attributes: lock up, gate, etc.

This entails that feeder funds do not have to stick to a specific master fund but can function legally as independent entities with the ability to invest in numerous different master funds.

Management and performance fees are usually paid at the feeder-fund level but can also be paid at the master fund level.

Compartments or tracking shares can also be put in place to segregate the type of underlying fund in which the investor will choose to invest.