Master Trust

Master Trust

A master trust is an investment vehicle that collectively manages pooled investments. In a master-feeder structure, assets are pooled, managed, and transacted from the master trust. A master trust is used as part of a comprehensive asset management scheme for a strategy managed with a master-feeder structure. A unit investment trust (UIT) may also be known as a type of master trust. It can refer to the main fund where assets are pooled and collectively managed in a master-feeder structure, also called a hub and spoke structure.

A master trust is an investment vehicle that collectively manages pooled investments.

What Is a Master Trust?

A master trust is an investment vehicle that collectively manages pooled investments. It can refer to the main fund where assets are pooled and collectively managed in a master-feeder structure, also called a hub and spoke structure. Employers can use a master trust structure for pooling investments in an employee benefit plan.

A master trust is an investment vehicle that collectively manages pooled investments.
A portfolio manager is responsible for overseeing the assets in the master trust.
Employers can use a master trust structure for pooling investments in an employee benefit plan.
Often employers use a master trust because it simplifies the process of managing employee benefits and keeps management costs down.

How a Master Trust Works

A master trust is typically some type of pooled investment vehicle that allows for the management of funds contributed from multiple sources. A portfolio manager is responsible for overseeing the assets in the master trust. The accounting and reporting functions for a master trust are usually complex. This is because a master trust involves multiple investors and may include many feeder funds.

A master trust is used as part of a comprehensive asset management scheme for a strategy managed with a master-feeder structure. Basically, it is the master fund that collectively invests for all the associated feeder funds. In a master-feeder structure, assets are pooled, managed, and transacted from the master trust.

BlackRock, for example, is an asset manager with an array of master-feeder funds. Each of the funds has a master trust where the assets are managed collectively. The investment company’s Master Trust LLC strategy uses a master-feeder structure. The Master Trust LLC is the master fund and its feeder funds include BIF Treasury Fund and BBIF Treasury Fund.

Other examples of BlackRock hub and spoke funds can be found at BlackRock Master Portfolios. Managing and trading assets collectively from a master trust allows the company to keep fund operating costs down.

Master trusts can be used for managing all types of portfolios.

Overall, master trusts provide for greater economies of scale. They allow a designated portfolio manager to manage the assets in a collective fund, keeping management costs down. Collectively pooling assets can also keep transaction costs low.

Types of Master Trust

Related terms:

Collective Investment Fund (CIF)

A collective investment fund (CIF) is a tax-exempt, pooled investment fund, available mainly in retirement plans. read more

Economies of Scale

Economies of scale are cost advantages reaped by companies when production becomes efficient. read more

Feeder Fund

Feeder funds take money from investors and channel it to a master fund that does the management work, cutting down on costs.  read more

Hub and Spoke Structure

An investment structure in which several investment vehicles, each individually managed, pool their assets, contributing to one central investment vehicle. read more

Master-Feeder Structure

A master-feeder structure is a device, commonly used by hedge funds, to pool capital raised by U.S. and non-U.S. investors.  read more

Master Fund

A master fund is a collective pool of assets used in a master-feeder investment structure, which offers the benefit of reduced operating costs and trading expenses. read more

Portfolio Management

Portfolio management involves selecting and overseeing a group of investments that meet a client's long-term financial objectives and risk tolerance. read more

Portfolio Manager

A portfolio manager is responsible for investing a fund's assets, implementing its investment strategy, and managing the day-to-day portfolio trading. read more

Unit Investment Trust (UIT)

Unit investment trusts (UIT) buy a fixed portfolio of securities and allows investors to redeem their "units," similar to a mutual fund.  read more

Widely Held Fixed Investment Trust (WHFIT)

A widely held fixed investment trust (WHFIT) is a unit investment trust that features at least one third-party interest holder. read more