Investor Beware: Feeder Funds
Why feeder funds require further LP attention
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Investor Beware: Feeder Funds
Welcome back! 👋
Today we’re going to talk about a hot topic: feeder funds. Simply said, these are cases where an LP invests through an intermediary (which we’ll refer to as a feeder fund) that pools such capital and invests it with the ultimate GP. As always I would love any feedback and you can contact me anytime at aleksey@hey.com.
When an LP calls me and has an issue on an existing investment, there’s a decent probability that the LP invested through a feeder fund based on my dataset so far. I hope to shed light on what’s going on behind the scenes in order to help LPs make better decisions going forward.
We’ll cover 3 topics today:
Examples of feeder funds, and their marketing strategies
Why do feeder funds exist?
Okay great, but where does it all go wrong?
A shorter version of this article appeared on The Promote earlier this week. It was fun collaborating with Hiten, who was the mastermind behind the meme below (which I am using with permission because I would never be able to come up with such a thing). You’ll see why it’s relevant soon…
Let’s dive in