A Luxembourg Master Feeder Fund and a Delaware Feeder Fund are two popular structures for investing in alternative assets such as hedge funds and private equity funds. We discuss the benefits of using a Luxembourg Master Feeder Fund to support a Delaware Feeder Fund and why this combination is becoming increasingly popular among institutional investors and high net worth individuals.
Luxembourg is a well-established financial center with a long history of supporting alternative investment funds. It is a leading hub for investment fund administration, offering a range of tax and regulatory benefits to fund managers and investors. One of the key advantages of a Luxembourg Master Feeder Fund is its flexibility in terms of fund structures and investment strategies. This allows fund managers to tailor their investment approach to the specific needs of their investors and to adapt to changing market conditions.
A Delaware Feeder Fund, on the other hand, is a US-based fund that is typically used to invest in a single underlying fund, such as a hedge fund or private equity fund. Delaware is a well-regarded jurisdiction for funds due to its favorable tax laws and business-friendly regulations. By using a Delaware Feeder Fund, investors can access the investment opportunities offered by a US-based alternative investment fund while also benefiting from the tax and regulatory advantages of the Delaware jurisdiction.
By combining these two fund structures, institutional investors and high net worth individuals can take advantage of the benefits offered by both the Luxembourg Master Feeder Fund and the Delaware Feeder Fund. The Luxembourg Master Feeder Fund provides the flexibility and adaptability that is essential in today’s fast-paced investment landscape, while the Delaware Feeder Fund offers the tax and regulatory benefits that are so attractive to investors.
One of the key benefits of using a Luxembourg Master Feeder Fund to support a Delaware Feeder Fund is the increased level of investor protection that it provides. A Master Feeder Fund structure enables fund managers to segregate their assets and liabilities, providing a higher degree of protection for investors. This is especially important for alternative investments such as hedge funds and private equity funds, where the risks can be much higher compared to more traditional investments such as equities and bonds.
Another benefit of using a Luxembourg Master Feeder Fund is the ability to access a wider range of investment opportunities. By investing in a Master Feeder Fund, investors can gain exposure to a diverse range of alternative investment funds, allowing them to diversify their portfolios and reduce their exposure to specific risk factors. This is particularly important for institutional investors and high net worth individuals who are looking to manage their exposure to risk and maximize returns.
In addition to these benefits, a Luxembourg Master Feeder Fund also provides greater transparency and reporting. Fund managers are required to produce regular reports and financial statements, which provide investors with a clear understanding of the fund’s performance and underlying investments. This increased level of transparency and reporting is essential for investors who are looking to make informed investment decisions.
Finally, by using a Luxembourg Master Feeder Fund to support a Delaware Feeder Fund, investors can also benefit from the lower cost of doing business in Luxembourg. Luxembourg has a lower cost of living compared to many other financial centers, and as a result, fund managers can operate more efficiently and pass on these savings to their investors.
Using a Luxembourg Master Feeder Fund to support a Delaware Feeder Fund is a popular choice for institutional investors and high net worth individuals who are looking to access the benefits of both fund structures. The combination provides increased investor protection, access to a wider range of investment opportunities, greater transparency and reporting, and lower costs of doing business. This combination is a flexible and adaptable investment structure that can be tailored to the specific needs of individual investors who want to access European alternative investments. Contact your Damalion experts now.
Why combine a Luxembourg master fund with a Delaware feeder?
Before you draft documents, confirm why each domicile serves your investor mix and downstream assets so subscriptions and first close run smoothly.
- Luxembourg master concentrates portfolio management, custody, and service-provider oversight in a familiar EU framework.
- Delaware feeder meets expectations of U.S. taxable and certain exempt investors with familiar governance and allocations.
- Efficient capital pooling across feeders improves trade execution, cash management, and audit consolidation.
For adjacent structuring ideas, see Luxembourg RAIF tax regime and Luxembourg hedge fund setup.
What are the key features and benefits of a Luxembourg master–feeder?
With these features in mind, you can align legal form, service stack, and investor documentation.
- Flexible master forms. Master often set up as RAIF, SIF, or SICAV/SICAF; strategy and investor profile drive the choice.
- Multiple feeders. Delaware and Luxembourg feeders can run in parallel for different tax and regulatory profiles.
- Single portfolio management. Centralised execution, risk and cash controls at the master improve pricing and governance.
- Operational clarity. One set of trading accounts, administrators coordinating capital activity, and unified audit at master level.
- Distribution flexibility. Waterfalls and fee mechanics can be tailored by feeder while preserving master NAV integrity.
If you also hold operating stakes, compare with Luxembourg holding companies and ring-fencing via SPVs.
How do you implement a Luxembourg master with a Delaware feeder?
Follow this sequence from term sheet to first close and initial investments.
- Define strategy and investor sets. Map U.S. taxable/exempt and non-U.S. investors, ticket sizes, and liquidity terms.
- Select master vehicle. Choose RAIF/SIF/SICAV form, appoint AIFM (if applicable), depositary, administrator, and auditor.
- Form Delaware feeder. Establish LP or LLC, draft LPA/LLC agreement aligned to master offering and fee terms.
- Draft constitutional and offering documents. Align investment policy, side-letter approach, fee schedules, risk and conflicts policies.
- Set banking and brokers. Open master trading and cash accounts, connect feeder cash sweeps and FX rails.
- Prepare KYC/AML and tax packs. Create unified onboarding with FATCA/CRS, W-8/W-9, and beneficial-owner attestations.
- Run first close. Coordinate capital calls, equalisation where relevant, and seed portfolio transfer (if any).
- Operate and report. Monthly NAV (if open-ended) or quarterly reporting, audit timetable, and investor notices.
For bank onboarding discipline, use our bank acceptance checklist as a quality benchmark.
Frequently asked questions about Luxembourg master–feeder with a Delaware feeder
These concise answers reflect common sponsor questions from structuring to reporting.
Which master vehicle works best for cross-border strategies?
Can I run both Delaware and Luxembourg feeders into the same master?
How are management and performance fees handled across feeders?
Do I need an authorised AIFM?
How do capital calls and equalisation work?
What is the role of the depositary at the master?
How are U.S. tax forms handled for Delaware investors?
Does the master have access to tax treaties?
How do I structure side letters without creating conflicts?
Can the master invest through Luxembourg SPVs?
What accounting and audit cadence should I plan?
How do redemptions work if I run an open-ended strategy?
What are common operational errors to avoid?
How do I communicate portfolio transparency?
Where can I compare with other Luxembourg fund routes?
| Topic | Master–feeder at a glance |
|---|---|
| Master domicile | Luxembourg (RAIF/SIF/SICAV as strategy dictates) |
| Feeder example | Delaware LP or LLC for U.S. investors |
| Governance | AIFM (where applicable), depositary, administrator, auditor |
| Operations | Centralised trading and cash at master; coordinated calls and reporting |
| Documents | PPM/Prospectus, LPA/LLC agreement, side-letter policy, risk disclosures |
Related reading to refine your structure: Luxembourg hedge fund formation, RAIF tax framework, and holding company benefits.
