Hub and Spoke Structure

A hub and spoke structure (also called a master-feeder structure) is a portfolio management arrangement in which multiple investment vehicles (the “spokes” or feeder funds) pool capital into a single central vehicle (the “hub” or master fund). Each spoke remains a distinct, individually managed vehicle but routes trades and cash flows through the master fund, which implements the investment strategy.

Key takeaways

• Multiple feeder funds (spokes) invest into one master fund (hub) that executes trades and holds the consolidated portfolio.
• The structure reduces transaction costs and creates economies of scale.
• Spokes can have different fee schedules, registrations, or marketing approaches while sharing a single underlying strategy.

How it works

Feeder funds accept capital from investors and channel that capital into the master fund. The master fund conducts all portfolio transactions, which concentrates trading activity and lowers per-unit transaction and custody costs. Each feeder can be tailored for different investor types (retail, institutional, domestic, offshore) while benefiting from the same centralized management and strategy.

Benefits

Cost efficiency and operational simplicity

• Centralizing trades in the master fund reduces execution and settlement costs.
• Fund operating expenses can be lower than maintaining completely separate portfolios for each share class or jurisdiction.

Marketing and business development

• Firms can offer multiple spokes with varying fee levels, share classes, or investment minimums to reach a broader investor base.
• Offshore and onshore spokes allow the same strategy to be marketed globally while meeting local regulatory and registration requirements.

Accounting, reporting, and tax advantages

• The master fund typically handles transactions, fees, and expenses, simplifying portfolio implementation.
• Feeder funds keep their own registrations and reporting, which helps segregate tax liabilities. For example, U.S. investors in an onshore feeder are insulated from tax obligations or reporting requirements specific to an offshore feeder.

Example

Large asset managers often use hub and spoke setups. In one common arrangement, a master portfolio (hub) is paired with two or more institutional feeder funds (spokes) that differ by strategy nuances or manager responsibilities while investing in the same master holdings.

Considerations

• Accounting and flow tracking can be complex, especially when managing cross-border feeders with different tax treatments.
• Legal, regulatory, and tax advice is typically required to structure feeders and the master fund appropriately for investor jurisdictions.

Further reading

Selected literature on master-feeder and hub-and-spoke arrangements includes academic and industry analyses of cross-border fund structures and jurisdictional choice, as well as practitioner materials from large fund managers that describe specific implementations.