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Master Fund Definition

What is a Master Fund?

A Brief Explanation of a Master Fund | Definition

A master fund can generally refer to a means for investment allowing for investment into one or more different investment vehicles. In other words, a master fund can be broken down into separate investments often operated by different managers. Types of master funds include fund of funds and feeder funds. In a feeder fund situation the master fund controls all portfolio’s and the entity acts as a single fund. This differs from a fund of funds situation where a master fund essentially is a composition of other funds. These other funds are individually managed.

Master funds are beneficial for a variety of reasons. In a fund of funds situation the due diligence and day to day management of capital is outsourced to other managers. However, an additional round of fees is necessary to obtain this outsourcing. A master fund drawing from feeder funds allow the feeder funds to obtain the benefits of a larger fund, often reducing the cost of some trading operations.

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