Understanding feeder funds and how they work

A feeder fund is an investment vehicle that allows investors to pool their money and invest in a larger target fund. This target fund is used to invest in funds that are typically not available and accessible to retail investors.

Investing in feeder funds is a good way to diversify your portfolio and get access to investments with high minimum requirements. Let’s take a deeper look at feeder funds.

What is a feeder fund?

A feeder fund is a structure that mandates the fund to invest at least ninety percent (90%) of its assets in a single collective investment scheme (CIS) or target fund.

The target fund shall refer to a local or foreign collective investment scheme in which the UITF (Unit Investment Trust Fund) invests all or a portion of its assets.

How do feeder funds work?

You can think of this as a community helping each other plant a tree. Each member contributes a certain amount in order to purchase materials needed to help the tree grow. A gardener (who is the fund manager) is then in charge of using the collected funds to care for the tree. Once the tree starts to bear fruit, everyone who has contributed funds to help grow the tree gets their share of fruits and its proceeds.

The advantage of investing in a feeder fund is that it allows individual investors to access investments that they would not be able to access otherwise. It also allows investors to gain exposure in securities which are only available offshore. By pooling their money in a feeder fund, however, individual investors can gain access to these types of investments.

What are the benefits of investing in a feeder fund?

Feeder funds are good investment options because they can provide the investor with numerous benefits such as:

• Lower minimum entry requirements- feeder funds typically have lower minimum entry requirements/affordable costs than the larger funds they invest in. This can save money over time.
• Larger investor pool- by investing in a feeder fund, investors gain access to the larger pool of capital that the master fund has. This can increase the chances of achieving better investment returns.
• Access to high-investment requirements- some large funds have investment requirements that are too high for most individual investors. Feeder funds make these investments more accessible to investors who would not otherwise be able to participate.

Still, for investors who are comfortable with taking on a certain amount of risk, feeder funds can be an attractive option.

What kinds of feeder funds does Metrobank offer?

Metrobank has two different kinds of feeder funds available to interested investors.

• Metro Aspire Feeder Funds- affordable feeder funds with an auto-debit feature, target funds are also Metrobank UITFs
  • Metro Aspire Bond Feeder Fund
  • Metro Aspire Balanced Feeder Fund
  • Metro Aspire Equity Feeder Fund
• USD Feeder funds- funds that allow you to gain exposure to the global market.
  • Metro$ World Equity Feeder Fund
  • Metro$ US Equity Feeder Fund
  • Metro$ Eurozone Equity Feeder Fund
  • Metro$ Japan Equity Feeder Fund
  • Metro$ US Investment Grade Corporate Bond Feeder Fund

Metrobank makes it easy for you to select a feeder fund that is right for your investment goals. With numerous options and an experienced team to manage each one, Metrobank can help you grow your portfolio and unlock significant gains. Invest in a Metrobank feeder fund today!