Feeder Fund

AAA

DEFINITION of 'Feeder Fund'

One of several funds that feed into an umbrella fund called the master fund, which oversees all portfolio investments and trading activity. A feeder fund's structure is commonly used by hedge funds to pool investment capital. The master fund's profits are split on a pro-rata basis among the feeder funds in proportion to their investment. Management and performance fees are also paid at the feeder fund's level.

INVESTOPEDIA EXPLAINS 'Feeder Fund'

A feeder fund can obtain better trading and operating costs through the master-feeder structure because of economies of scale, rather than operating on its own. However, this structure would not be appropriate for a feeder fund that has unique investment characteristics and priorities, since these would be subsumed along with the other feeder funds in the master fund.

RELATED TERMS
  1. Hedge Fund

    An aggressively managed portfolio of investments that uses leveraged, ...
  2. Master-Feeder Fund

    A structure commonly used by hedge funds to pool investment capital ...
  3. Fund Of Funds

    A mutual fund that invests in other mutual funds. This method ...
  4. Hub And Spoke Structure

    An investment structure in which several investment vehicles, ...
  5. Master Fund

    In general, an investment vehicle that enables individual investors ...
  6. Dividend

    A distribution of a portion of a company's earnings, decided ...
Related Articles
  1. Active Trading Fundamentals

    Fund Of Funds - High Society For The Little Guy

    Like a mutual fund, FOFs provide instant diversity by grouping many hedge funds into one product.
  2. Professionals

    10 Steps To A Career In Hedge Funds

    Experience and hard work go a long way toward securing a position in this challenging field.
  3. Mutual Funds & ETFs

    Hedge Funds' Higher Returns Come At A Price

    Learn how hedge funds win big gains for investors - and why they sometimes lose.
  4. Options & Futures

    Hedge Funds Hunt For Upside, Regardless Of The Market

    Hedge funds seek positive absolute returns, and engage in aggressive strategies to make this happen.
  5. Options & Futures

    Hedge Funds Go Retail

    Find out how average investors are breaking into what was once reserved for the ultra rich.
  6. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  7. Mutual Funds & ETFs

    How To Apply Technical Indicators To Mutual Funds

    Mutual funds do not readily lend themselves to technical analysis, but investors can use common indicators to evaluate mutual funds as easily as stocks.
  8. Professionals

    Should Investors Nix Actively Managed Funds?

    Index fund returns are on a tear but does this mean investors should nix actively managed funds?
  9. Mutual Funds & ETFs

    Are These 2015's Most Promising Mutual Funds?

    For 2015, the mutual funds covered below are likely to offer more upside potential than the vast majority of mutual funds in existence.
  10. Mutual Funds & ETFs

    Why These Could Be 2015's 10 Best Mutual Funds

    These 10 mutual funds offer strong potential for 2015. Here's why.

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center