Hub And Spoke Structure

Definition of 'Hub And Spoke Structure'


An investment structure in which several investment vehicles, while each remaining individually managed, pool their assets together by contributing to one central investment vehicle. The smaller investment vehicles are referred to as the "spokes" and the central investment vehicle is referred to as the "hub".

This is also called a "master-feeder structure".

Investopedia explains 'Hub And Spoke Structure'


Employing a hub and spoke structure can provide substantial benefits to managers of investment funds or similar investment vehicles.

The common key benefit is derived from tax savings created by the structure. U.S. investors who have taxable investments in off-shore investment companies will likely incur tax liabilities due to the offshore fund's (the spoke) classification as a passive foreign investment company (PFIC). However, the central investment fund (the hub) can avoid PFIC status, and when structured as a partnership with the spoke fund, insulate the investor from taxes that would otherwise be incurred on the spoke fund.

As well, hub and spoke structures provide economies of scale to their participating investment vehicles, which can further enhance the bottom-line returns for investors.



comments powered by Disqus
Hot Definitions
  1. Cash and Carry Transaction

    A type of transaction in the futures market in which the cash or spot price of a commodity is below the futures contract price. Cash and carry transactions are considered arbitrage transactions.
  2. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  3. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  4. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  5. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  6. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
Trading Center