How much to allocate

How much of a portfolio should go into venture?

The most useful evidence for a private client is a 2021 study by the research firm Hardman & Co. It added venture to an equity and bond portfolio using mean-variance optimisation, with separate assumptions for seed and later-stage (scale-up) venture, and found the highest-return mix at each risk level.1

To see what those weights do in a whole portfolio, the portfolio mix simulator runs a mix of listed and private assets through J.P. Morgan's 2026 long-term capital market assumptions, with the Hardman profiles as presets.4,1

In the 60/40 case the venture comes mostly out of shares, which fall to 37%, while bonds rise to 55%.1 The venture return assumptions are the weakest input. Hardman assumed 22% a year for seed, and a bottom-quartile fund, returning about 1 times its money so far, is nowhere near that.5 Still, the model points to a high single-digit share for a balanced client, and more where tax relief applies, as it does through an ESVCLP.2

Institutions show how far the number moves with time horizon. Family offices held 17% in private equity of all kinds in 2025, and the largest US endowments 32% in private assets.6,7 Australian super funds hold very little Australian venture: AustralianSuper's commitments are about 0.34% of the fund, and 13 of the 20 largest funds have no public commitment to it.8 None of these is a benchmark for an individual.

Why not put more into venture?

Because outcomes vary so widely between funds. Among 2019-vintage funds on Carta, a top-quartile fund stood at 1.9 times net TVPI at the end of 2025 against 1.02 times for the bottom quartile, and the top decile at 3.01 times, mostly unrealised. For the more mature 2017 vintage the top quartile was 2.53 times and the median 1.89 times.5 Nobody knows in advance which group a fund will land in, and the money is locked up for a decade. At the levels above, a poor fund disappoints without changing the client's plans, and past about a quarter of the portfolio the Hardman model stops rewarding more venture even for the most aggressive investor.1

Commonfund, which manages money for US endowments and foundations, frames the decision around need, ability and willingness: whether the portfolio needs the extra return, whether it can ride out the illiquidity, and whether the client will keep committing through a bad year.7

When should the number be lower, or zero?

Any of these points to a smaller allocation than the research figure, or none.

• The horizon is under ten years. A fund runs 10 years or more and can extend, so money needed inside that window for retirement income, a property or a business doesn't belong in it.
• The client lives off the portfolio. Venture pays no income and returns cash late and unevenly.
• Cash for the calls is tight. Calls arrive at short notice for three to five years, and a client without spare cash or listed assets may have to sell something at a bad time to meet them.
• They already hold a lot of startup risk. A founder or tech executive with most of their wealth in one company is already concentrated in venture-style outcomes.
• They can't use the offset. The ESVCLP offset is non-refundable, so it's worth more to a client with tax to absorb it, though unused amounts carry forward.2
• They won't stick with it. A program of three or four funds over six to eight years only works if the client keeps committing.

The holding entity changes the answer too: an SMSF has its own liquidity and investment strategy rules. See Which entity should invest? and Venture in an SMSF. Funds often report early losses before any gains show, the J-curve covered in How venture returns work.

How do capital calls affect liquidity planning?

Capital calls usually come over the fund's first three to five years. A $250,000 commitment to a fund that calls about 25% a year means roughly $62,500 a year for four years.

• Keep the uncalled amount somewhere it can be reached quickly, and read the default penalties in the fund documents before committing.
• Don't count on distributions to pay for later calls. In most funds the money goes out years before it comes back.
• Fees are usually charged on committed capital from the start, so part of the early calls goes on fees rather than investments.

After your client commits covers call notices and the paperwork.

Why spread commitments across vintage years?

A single fund ties the result to one manager and one vintage year: its companies are bought at that period's prices and sold into whatever exit market exists five to ten years later. Exit markets swing sharply. In the US, 311 operating companies listed in 2021 and 38 in 2022, by Jay Ritter's count.9 Nobody can reliably pick a good vintage in advance.

Institutions commit steadily. HarbourVest, a large private markets investor, ran a simulation on funds from the 1995 to 2012 vintages and found even yearly commitments gave the best risk-adjusted results of the approaches it tested.3 The portfolio was 85% buyout and 15% venture, but the logic carries to venture, where the gaps between managers and years are wider.

For a private client, that means several commitments, one every year or two, with more than one manager where minimums allow. How to vet a venture fund covers choosing them.

Should the allocation go into funds or direct deals?

Family offices split theirs roughly evenly: in the UBS survey, 8% of the average 2025 portfolio was in direct private equity and 9% in funds.6 Those offices have their own investment staff and deal flow.

A private client investing directly needs deal access, time to assess deals and enough separate cheques for the few winners to appear. A fund also handles the tax eligibility, so an ESVCLP's offset and exempt gains apply across the whole portfolio.2 For most clients a fund is the practical core, with any direct deals sized smaller, and a fund commitment every year or two is far easier to pace than dozens of direct cheques.

A worked example

Take a wholesale client with a $12.5 million balanced portfolio. Hardman's 8% would put about $1 million into venture, built over about eight years. The figures are illustrative and match the commitment planner's starting settings.

1. Split the exposure into four commitments of $250,000, one every two years. Minimums vary by fund; $250,000 is common for wholesale venture funds.
2. Each fund calls about $62,500 a year for four years. Because a new fund starts every two years, two funds overlap from year three to year eight.
3. The most the client pays in any year is about $125,000. Committing the whole $1 million to one fund in year one would mean $250,000 a year for four years.
4. The four commitments land in four different vintages, and can go to two or more managers, so no single fund or year decides the outcome.
5. Through ESVCLPs, the offset is up to 10% of what the client pays in each income year, capped by their share of the fund's eligible investments, so up to about $12,500 for a peak year, claimed in that year's return.2
6. Distributions from the first fund may start while the later funds are still calling, but nothing in the plan relies on them.

The plan depends on the client continuing to commit. A program that stops after the first fund is back to one manager and one vintage.

Frequently asked questions

Talk to us about Fund III

Tall Order is a Melbourne seed fund. Fund III is a registered ESVCLP for wholesale investors. Justine Lum, our Head of IR, works with advisers and their clients.

Contact Justine Fund III