Feeder funds

Feeder funds

Diversification in investing refers to access to various investment choices that fit your financial objectives and risk tolerance. However, not all investors have the tools or knowledge to spot and seize investment opportunities across various markets and asset classes. Feeder funds are useful in this situation. Through a master fund managed by qualified investment professionals, feeder funds are a type of investment vehicle that enables investors to gain indirect access to a wide range of investment opportunities. 

What are feeder funds? 

Feeder funds are financial instruments that direct cash into a master fund, which may be situated in a different region or nation. A greater variety of investment options than otherwise might be accessed are made available to investors thanks to the feeder fund mechanism. Aside from gaining exposure to new markets and asset classes, investors profit from the expertise of the managers of the master fund. 

Understanding feeder funds 

Investors can indirectly access diverse investment opportunities through feeder funds, a type of investment vehicle. These funds give investors access to specialised investment techniques, professional management, and diversification. Before investing, however, investors should carefully analyse the performance, costs, and liquidity conditions of the feeder fund.  

Individual investors who might lack the skills or knowledge to access the underlying investments directly find feeder funds to be particularly alluring. Although the performance of the feeder fund and the master fund are directly correlated, investors should know that their additional fees may impact their net returns. 

Structure of feeder funds 

Feeder funds are designed as financial entities that pool investor funds before investing those monies into a master fund. The master fund may be based in another nation or jurisdiction and is normally managed by a skilled investment team. The master fund, which has access to various investment options, is typically where the feeder fund’s investments are restricted.  

Investors can access new markets and asset classes thanks to the structure of feeder funds with less risk and less initial outlay. All administrative responsibilities for investing in the master fund, such as reporting and regulatory compliance, are handled by the feeder fund. The feeder fund often charges investors fees, such as management and performance fees, in return for these services. Fees from the master fund may also be passed on to investors through the feeder fund. 

Factors to consider while investing in a feeder fund 

The several factors investors should consider before investing in a feeder fund are as follows: 

  • Feeder funds invest in a master fund with a specific investment objective. It is important to understand the investment objective of both the feeder fund and the master fund to determine if it aligns with your investment goals and risk tolerance. 
  • The investment strategy of the master fund is crucial to understanding the risks and potential returns of the feeder fund. Investors should research the investment strategy, asset allocation, and historical performance of the master fund. 
  • Fees have a big impact on a feeder fund investment’s net returns. Investors should evaluate the fees levied by various feeder funds and consider how this may affect their long-term results. 
  • The master fund’s experience and track record can offer important insights regarding the feeder fund investment’s likelihood of success. 
  • Feeder funds may be subject to different regulations and tax laws in different jurisdictions. Investors should research the regulatory environment of both the feeder fund and the master fund to understand the potential impact on their investment. 
  • Different liquidity conditions and limitations may apply to feeder funds than the master fund. Understanding the liquidity parameters of the feeder fund and the master fund is crucial to figure out whether they meet your investing demands. 

Working of feeder funds 

Feeder funds collect investor capital and then invest it into a master fund. The master fund may be based in a separate jurisdiction or nation and is often managed by a skilled investing team. The master fund, which has access to various investment options, is often where the feeder fund’s investments are restricted.  

All administrative responsibilities for investing in the master fund, such as reporting and regulatory compliance, are handled by the feeder fund. The feeder fund often charges investors fees, such as management and performance fees, in return for these services. The master fund’s performance and the feeder fund are directly related.  

As a result, the management team of the master fund’s investment strategy and knowledge play a significant role in the feeder fund’s ability to make money from investments. Investors’ ability to acquire or sell their shares may be impacted by the feeder fund’s potentially different liquidity terms and restrictions from the master fund. 

Frequently Asked Questions

Investors can invest in feeder funds through financial advisors, brokers, or investment platforms. Feeder funds may have minimum investment requirements and may only be available to accredited or institutional investors. 

To choose the best feeder funds, investors should consider the investment objective, investment strategy, fees, fund manager experience, regulatory environment, and liquidity terms of the fund. 

Investors can choose from a variety of feeder fund types. Bond feeder funds invest in bonds, whereas equity feeder funds do the opposite. Sector feeder funds invest in a particular industry, such as technology or healthcare. While multi-manager feeder funds invest in multiple master funds managed by various investment managers, country-specific feeder funds invest in a specific country’s stock or bond markets. Alternative feeder funds make investments in unconventional assets. 

The pros of feeder funds are: 

  • Access to diversified investment opportunities managed by experienced investment teams. 
  • Investing through a master fund has higher minimums than direct investments. 
  • The feeder fund handles regulatory compliance and reporting. 

The cons of feeder funds are: 

  • An additional layer of fees can impact net returns 
  • The performance of the feeder fund is linked to the performance of the master fund 
  • Limited control over the underlying investments 
  • Liquidity restrictions may apply 

Feeder funds can give individual investors access to a variety of investment options that they might not otherwise have. However, investors should consider the feeder fund’s investment strategy, fees, and liquidity terms before investing to ensure they align with their investment objectives and risk tolerance. 

    Read the Latest Market Journal

    Weekly Updates 26/2/24 – 1/3/24

    Published on Feb 28, 2024

    This weekly update is designed to help you stay informed and relate economic and company...

    All-in-One Guide to Investing in China via ETFs

    Published on Feb 27, 2024 67 

    Start trading on POEMS! Open a free account here! Why China? In the vast landscape...

    Navigating the Post-Inflation Landscape in 2024: Top 10 US Markets Key Events to Look out for

    Published on Feb 23, 2024 100 

    Start trading on POEMS! Open a free account here! In 2023, the United States experienced...

    From Boom to Bust: Lessons from the Barings Bank Collapse

    Published on Feb 23, 2024 32 

    Barings Bank was one of the oldest merchant banks in England with a long history...

    Decoding FX CFD 2.0

    Published on Feb 20, 2024 63 

    This article is aimed at availing information and knowledge essential to intermediate forex traders. It...

    Weekly Updates 19/2/24 – 23/2/24

    Published on Feb 19, 2024 88 

    This weekly update is designed to help you stay informed and relate economic and company...

    Unlock Prosperity with 5 Sure-Fire Financial Instruments!

    Published on Feb 14, 2024 195 

    In Singapore, the concept of guaranteed returns may evoke the spirit of prosperity, reminiscent perhaps...

    Weekly Updates 12/2/24 –16/2/24

    Published on Feb 13, 2024 70 

    This weekly update is designed to help you stay informed and relate economic and company...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com