A common type of hedge fund structure is called a “master feeder”. A master feeder fund is a two-tiered investment structure in which investors invest their capital in a “feeder” fund, which in turn invests in a “master” fund managed by the same investment advisor. The master fund is the entity that invests in the market.
A typical master feeder setup has one master fund with one U.S. (or onshore) feeder and one Non-U.S. (or offshore) feeder. The benefit of this organization is that it doesn’t restrict the investing fund to just one type of investor (that is, tax-exempt versus U.S. taxable).
Feeder funds under the same master can differ in their investor types, investment minimums, fee structure, net asset values, and other operational features. Said another way, feeder funds are NOT tied to a particular master fund, but rather are their own legal entity. As such, they are their own partnerships, and can invest in any number of master funds.
A master fund is its own legal entity, and is typically an offshore corporation. An offshore corporation can “check the box” and elect to be taxed as a partnership for U.S. tax purposes. By investing in an offshore master feeder fund taxed as a U.S. partnership, the onshore feeder will receive “pass-through” treatment for its share of the master fund’s P&L.
The investment managers or general partners of offshore funds can be offshore corporations owned substantially by the fund manager or the manager’s U.S. entity.
The business structure of a master feeder fund with onshore and offshore feeders is illustrated in the source link below.
feeder fund for Non - US Investors(Mutual fund)
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Master fund(Hedge fund)
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feeder fund for US taxable Investors(Mutual fund)
Is this kind of structure available??
