A feeder fund is a vehicle that pools capital from its own investors and invests it, in turn, into a central “master” fund where the actual strategy runs. The master-feeder architecture lets one portfolio serve multiple investor populations — and it’s the machinery behind most alternative-investment access platforms.
How master-feeder structures work
The master fund holds the investments; feeders hold interests in the master; investors hold interests in a feeder. Trades, positions, and performance live once, at the master level, and flow up pro rata — avoiding duplicated portfolios while letting each feeder be built for its audience.
The classic use is tax and jurisdiction sorting in hedge funds: a U.S. LP feeder for taxable U.S. investors (passing through K-1s) and an offshore corporate feeder — often paired with Regulation S — for non-U.S. investors and U.S. tax-exempt accounts, where the corporate blocker prevents UBTI. Same portfolio, different wrappers, each population getting the tax treatment it needs.
The use advisors now meet most often is access aggregation: platform feeders that gather many smaller commitments into a single large ticket meeting an institutional fund’s minimum. A flagship private equity fund with a $10 million minimum becomes reachable at $100,000 through a feeder — the core mechanic of the alternative-investment platforms serving RIAs and wirehouses, and of many qualified purchaser and 3(c)(1) structures engineered around eligibility rules.
Feeder diligence adds a layer to fund diligence: the extra fee stratum (platform/feeder fees on top of the master fund’s management fee and carried interest — the all-in load is the number that matters), operational dependence on the feeder’s administrator for capital calls and reporting, whether feeder investors receive the same terms and information as direct LPs, and — in fund-of-funds comparisons — the distinction between a feeder (one underlying fund, access play) and a fund of funds (many underlying funds, selection play).
FAQ
What is a feeder fund in simple terms?
A pooling vehicle that collects investors’ money and invests it into a bigger master fund — investors get the master’s performance through the feeder wrapper.
Why do feeder funds exist?
Two main reasons: sorting investors by tax/jurisdiction needs (U.S. vs. offshore feeders into one hedge fund), and aggregating smaller checks to meet institutional minimums (access platforms).
Do feeder funds cost more?
Often — platform or feeder-level fees stack on the underlying fund’s fees, so the all-in expense versus investing directly (if possible) is the comparison that matters.
Related terms
Fund of Funds · Hedge Fund · Qualified Purchaser · UBTI · Special Purpose Vehicle (SPV)
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