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Fund StructuresReviewed 2026-07-21

Master-Feeder Structure

A structure where one or more feeder funds pool investor capital into one master fund that holds all positions — commonly paired onshore and offshore feeders.

Definition

A master-feeder structure splits a fund into two layers: one or more feeder funds that raise capital from investors, and a single master fund that actually holds positions, trades, and maintains exchange or custodian relationships. Each feeder invests substantially all of its assets into the master in exchange for an interest in the master, so every dollar raised — regardless of which feeder it came through — ends up in the same trading book.

The most common arrangement is two feeders sharing one master: an onshore feeder, typically a Delaware limited partnership, for US taxable investors, and an offshore feeder, typically a Cayman exempted company or exempted limited partnership, for non-US investors and US tax-exempt institutions such as pensions and endowments that need to avoid unrelated business taxable income. The master itself is usually organized in an offshore jurisdiction as well. Both feeders are managed by the same general partner or manager and run the identical strategy, because there is, in substance, only one book of trades.

This is distinct from a side-by-side structure, where two legally separate funds each hold their own positions and trade the same strategy in parallel — master-feeder consolidates execution into a single vehicle while side-by-side duplicates it. Master-feeder is chosen specifically when a manager needs to serve investor bases with different tax or regulatory requirements without splitting trading, custody, and operations across multiple books.

Why it matters

Consolidating all capital into one master book means a single set of exchange accounts, wallets, prime broker or custodian relationships, and a single trading team executing one strategy — regardless of how many investor pools feed it. That materially lowers operational overhead compared with running the same strategy twice in parallel, and it simplifies risk management because exposure, leverage, and concentration are measured once, at the master, rather than reconciled across duplicate books.

For capital raising, the offshore feeder is often not optional in practice: many institutional allocators — non-US investors and US tax-exempt entities in particular — will not subscribe directly into an onshore taxable partnership at all. A manager without an offshore feeder can find an entire segment of prospective LPs simply unable to invest, independent of how strong the strategy is.

How it works

Each feeder subscribes for shares or interests in the master at the master's own NAV per share, so a feeder's balance sheet is, in effect, just a holding of master-fund shares plus a small amount of its own cash for feeder-level expenses. The master computes a single NAV from its trading book; each feeder then computes its own NAV per share by taking its pro-rata share of the master's NAV and layering on feeder-level costs — its own audit fee, its own administrator charge, any feeder-specific side letters — which is why two feeders holding the same underlying master position almost never report identical NAV per share.

Subscriptions and redemptions still happen at the feeder level: an investor sends cash to their feeder, which in turn subscribes into the master (or redeems out of it) to keep its pro-rata share aligned. The feeder is the legal counterparty an investor signs a subscription agreement with; the master is a vehicle the investor never contracts with directly.

Common mistakes

Assuming each feeder runs its own trading book — it does not. All market risk, leverage, and exchange or custody relationships sit exclusively at the master; the feeder itself holds nothing but master-fund shares and its own operating cash.
Expecting identical NAV per share across feeders — the feeders' NAVs diverge over time because each carries its own layer of feeder-level expenses on top of an identical pro-rata claim on the master.
Underestimating the added administrative burden: master-feeder means two or three sets of books (each feeder plus the master), inter-fund allocations calculated every NAV cycle, and audit work at every layer, versus one set of books for a single-vehicle fund.
Confusing master-feeder with a mini-master, where a master fund has one feeder plus one or more large investors subscribing directly into the master itself — a related but distinct arrangement commonly used to avoid standing up a second feeder for a small number of large allocators.

In practice

For a crypto fund, master-feeder concentrates every exchange API key, wallet address, and custodian relationship at the master — a feeder investor's capital never touches an exchange account directly; it is aggregated at the master and the resulting position-level book is what actually gets marked and reconciled. NAV and P&L still have to be computed once at the master and then allocated down through each feeder's pro-rata share plus its own expense layer, which is meaningfully more bookkeeping than a single-vehicle fund carries.

Given the typical AUM range for an emerging crypto fund ($1M–$50M), master-feeder is usually adopted only once there is real, standing demand from both an onshore and an offshore or tax-exempt investor base — for a fund that is still exclusively raising from one investor type, a single limited partnership or offshore fund is the simpler and cheaper starting point.

Questions, answered

What is a master-feeder structure?

A master-feeder structure is where two or more feeder funds each raise capital from a distinct investor base and invest substantially all of it into a single master fund, which is the vehicle that actually holds positions and executes the trading strategy.

Why do funds use separate onshore and offshore feeders?

Onshore feeders (typically Delaware) suit US taxable investors, while offshore feeders (typically Cayman) suit non-US investors and US tax-exempt institutions that need to avoid unrelated business taxable income. Splitting them lets one strategy serve both without forcing either group into an unsuitable tax wrapper.

Do feeder funds trade independently of each other?

No. Feeders hold no trading positions of their own — they hold shares or interests in the master fund, and all trading, custody, and exchange relationships sit exclusively at the master level.

Is a master-feeder structure necessary for a small fund?

Not usually. Master-feeder adds real administrative cost — multiple sets of books and cross-fund allocations every NAV cycle — so it is generally adopted once a manager has standing demand from both onshore and offshore or tax-exempt investors, rather than from the outset.