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 fund structure, also called a hub and spoke structure. A master trust structure may also be used for pooling investments in an employee benefit plan.

A master trust is typically some type of pooled investment vehicle that allows for management of funds contributed from multiple sources. Accounting and reporting for a master trust is usually complex since it 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. The master trust is the master fund which collectively invests for all the associated feeder funds. In a master-feeder structure, assets are pooled, managed and transacted from the master trust.

BlackRock is one 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 here: BlackRock Master Portfolios. Managing and trading assets collectively from a master trust allows the company to keep fund operating costs down.

A unit investment trust may also be known as a type of master trust. These vehicles pool shareholder investments and typically include diversified holdings managed to a specific strategy. A unit investment trust may have a specified duration with a predetermined maturity date.

Employee benefit plans may also choose to collectively manage assets for employees in a master trust. An employer can establish a master trust for which they and their employees collectively contribute investments. Assets are managed collectively in the master trust. Companies may also choose to pool assets with other companies in a master trust specified with clear objectives and segregated reporting.

Overall, master trusts provide for greater economies of scale. They can be used for managing all types of portfolios. 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.