Definition of Feeder Fund in Private Equity

A feeder fund is an investment fund that invests primarily in another fund or investment entity. Feeder funds are generally organized as non-profit organizations, but may take on other legal structures.

The term refers to the investment of capital in another fund, which in turn invests in specific assets. These specific funds are called "parent funds". Feeder funds can be investment platforms, meaning that they can offer access to a variety of parent funds, each designed for a particular investment objective and style.

Feeder funds are often used by institutional investors or wealthy families to diversify their portfolios and reduce risk. Feeder funds can also be used to invest in funds that are not normally accessible to individual investors.

This structure enables investors to spread their investment across different parent funds, and diversify easily. Investors using feeder funds should be aware, however, that their portfolio will be exposed to additional risks. In addition to the risks associated with the underlying assets of the parent fund, they will also be exposed to the risks associated with the feeder fund.