Glossary · Fund Structures
Feeder Fund
A feeder fund is an investment vehicle that invests substantially all of its assets into another fund, typically a master fund, rather than holding a portfolio directly.
A feeder fund aggregates investors with similar tax, regulatory or currency needs and channels their capital into a master fund. Feeders are the building blocks of a master-feeder structure. Feeders are also used by private banks and platforms to give clients access to a third-party fund at lower minimums.
The feeder’s main asset is its interest in the master, so its NAV depends on the master’s NAV and the allocation of master-level results. Feeder-level items, such as management fees, performance fees, currency hedging and expenses, are then applied.
Pitfalls include timing mismatches between master and feeder NAVs, misallocation of master-level income and expense, incorrect treatment of feeder-level cash, and duplicated fees where the documents intend a single layer. Feeder and master records should be reconciled at each valuation point, including capital activity between the two levels, so that the feeder’s share of the master always agrees to both sets of books.
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