The master fund trades; the feeders hold shares or partnership interests in the master and pass performance through to their own investors. This lets a manager run one book and one track record while giving each investor group a vehicle that suits its tax and regulatory position.
The cost is complexity: two or more entities, each with its own documents, audit and administration. Master-feeder structures are common for established hedge funds with a mixed investor base and rarer at launch, where the extra cost is hard to justify.