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Feeder Funds

Feeder Funds

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Published by VanStokkom

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Published by: VanStokkom on Jul 12, 2009
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July 2009
Feeder funds
Henk J.Th. van Stokkom
 –
www.vanstokkom.nl
Via Google I searched for
 playing hard to get 
and 161.000.000 hits were the result. I also googled
equal partnership
and 3.490.000 results were available.In the development world the phrase
equal partnership
has been used a lot over the last ten years .But who plays
‘ 
hard to get 
’ 
the donor or the NGO .. ? Who determines the reporting and who shutsthe
faucet
if push comes to shove?A similar situation was faced twenty years ago in the financial world. Fund managers were beggingfor money and institutional investors were determining the game. A classic
‘ 
buyers market 
’ 
.So the beggars had to prove how good their results were, how sophisticated their investmentmethods and how safe their procedures were and so on.But somewhere and somehow it changed to a certain extent. With Madoff as an interesting example.Because Madoff was delivering constant - relative high - results for people investing with him, hestarted playing
hard to get 
. So if you wanted to put money into an account that was managed byMadoff and company, it was not a matter of signing and transferring the money. All doors wereclosed and existing customers rumored about the results, but you never saw a Madoff 
give us your money 
’ 
advertisement. In the meanwhile the account minimum was raised and your two hundredthousand dollars were not so very interesting anymore. Because the minimum account level wasraised feeder funds appeared. They aggregated the money to the minimum level needed. Thereforethe distance between investor and Madoff became larger and people had to rely on the informationfrom the feeder funds.Todays large fund raising organizations like Oxfam etcetera are the ones investing in
 final 
’ 
operatorswho run projects for children. So they do what Madoff was supposed to do; invest the money andmake sure there is a good return.Madoff made a return for the ones who supplied the money. Fund raising organizations aresupposed to make a social return for the target group they
invest
the money in, on behalf of thesuppliers. And while Madoff and his feeder funds are now in deep trouble (after raking in 50 billiondollars or so..) one can see the same mechanics in the world of philanthropy in general anddevelopment aid in particular. In The Netherlands we see products whereby you take out a mortgageand part of the money is not for you but for an NGO building houses in Africa or elsewhere. For theDutch mortgage owner the interest paid on the mortgage is tax deductable. Sounds like a
 feeder 
 construction to you? It certainly does to me. There is also an organization that collects money via theInternet. Your money will be
invested 
for 100% in projects for children via organizations like Unicef.Sounds like a feeder fund? It does to me.Feeder funds can be good. They can be located in the country of the investor and therefore use taxfacilities or be setup in such a way that tax facilities for the donors can be used. Facilities that the

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