Venture in a portfolio
How venture capital compares with listed shares, property, private equity, private credit and angel investing, what its near-zero reported correlation with shares does and doesn't mean. It also covers where venture sits in a client's portfolio and how super funds, endowments and family offices hold it.
TL;DR
- Venture sits at the far end of growth assets. It has the widest spread of outcomes and the longest lock-up of anything a client is likely to hold, and the most generous tax treatment when held through an ESVCLP.1
- Reported correlation with shares is close to zero. Studies of venture returns find figures around zero. Slow valuations and exits that depend on markets mean the long-run link is stronger than that, so model it both ways.2,3
- The diversification is in what a client owns. Young private companies the share market can't reach, with returns driven by a few of them over ten years or more.
- It comes out of the growth assets. It's usually funded from shares and property exposure, not from money the client may need within a decade.
- Australian super barely holds Australian venture. AustralianSuper's Australian venture commitments are about 0.34% of the fund. The largest US endowments hold about 32% in private assets.4,5
How does venture capital compare with shares, property, private equity and private credit?
Venture has the biggest possible upside of the options below and the least certainty of getting it.
| Where the return comes from | Main risk | Getting money out | Fees | Way in | Tax on gains from July 2027 | |
|---|---|---|---|---|---|---|
| Listed shares | Profits, dividends and market growth | Market falls, felt daily | Any trading day | Low for index funds | Open to anyone, small amounts | New rules: inflation-adjusted cost, 30% minimum tax |
| Investment property | Rent and capital growth, usually on borrowed money | One or two assets, one city, interest rates | Months, and all or nothing | Stamp duty, agents, upkeep | A deposit plus a loan | New rules, with a choice of the old 50% discount on new builds; negative gearing limited for established homes bought after Budget night |
| Private equity (buyout) | Improving mature businesses, often with debt | Leverage and manager quality | Locked for 10 years or more | Typically 2% a year plus 20% of profits | Wholesale only | Usually the new rules |
| Private credit | Interest on loans | Borrower defaults; capped upside | Depends on the fund's redemption terms | Management fee plus margins that can be hard to see | Retail and wholesale funds | Interest taxed as income |
| Angel investing | A few startups that grow very large | Concentration; most startups fail | Years, no market | None, but a lot of the client's time | Direct cheques into companies | Usually the new rules |
| Venture fund | A few startups that grow very large, across a portfolio | Most companies fail; wide gap between managers | Locked for 10 years or more, called over 3 to 5 | Typically 2% a year plus 20% of profits above a hurdle | Wholesale only | Through an ESVCLP, up to 10% offset and eligible gains tax-free |
General comparison; individual products vary. Tax rows summarise the 2026-27 Budget measures and the ATO's ESVCLP rules.6,7,1 Fee terms shown are typical; each fund sets its own. ASIC's 2025 review of private credit flagged opaque fee and remuneration structures.8
Angel investing and venture funds share the same return pattern. The differences are who picks, how many companies the client ends up owning, and the tax treatment: through an ESVCLP, eligible investments across the portfolio carry the offset and the exemption.
Private equity shares venture's structure, fee model and decade-long lock-up, but buyout funds buy control of established businesses, often with debt, while venture funds buy minority stakes in companies usually years from a profit. How a venture fund works explains the mechanics.
Does venture capital really move independently of the share market?
On the reported numbers, largely yes. AngelList found a correlation of 0.0 between its seed portfolio's monthly returns and the Nasdaq from 2015 to 2020, with no significant link even when it allowed for valuations lagging the market by up to 20 months. Invesco measured −0.06 between venture and large-cap share returns, and Cambridge Associates' vintage data show only a very weak link with public market indices.2 Much of a startup's value comes from whether its product works and its customers grow, which the share market doesn't drive.
Two things pull the long-run link up.
A startup is valued by its manager, usually quarterly (its mark), from the last round, comparable companies and judgement. Those appraisals move slowly. A 20% market fall may not reach a fund's reported value until the next round is priced, so the fall shows up late and in steps, and the series looks calm and out of step with markets.3
The same fall, priced daily and appraised quarterly
Scroll sideways for the full chart
Hamilton Lane makes the same point about private equity volatility, which it says should be taken "with a grain of salt".3
Venture also meets public markets at the exit, since acquisitions and listings depend on market appetite. In Jay Ritter's count, 311 US operating companies listed in 2021 and only 38 in 2022.9 That's why long-run planning models such as J.P. Morgan's assume a correlation of about 0.6 between venture and shares.10 The portfolio mix simulator runs a mix both ways.
What to tell a client about correlation
Venture's reported returns have moved largely independently of the share market, which is real diversification in the numbers a client will see. Over a full cycle the link is stronger, because valuations catch up and exits need buyers, so a portfolio model should be run with a higher correlation as well.
What does venture add that a share portfolio doesn't?
Access to a stage of company growth that listed markets have mostly lost. The median US company that listed in 2025 was 12 years old; in 1999 it was five.9 More early growth now happens while only private investors can own it.
The drivers differ too. A venture fund's result usually comes down to whether two or three of its companies become very large (the power law), which is company-specific exposure a share portfolio can't provide.
The payoff is lumpy and slow. Australian venture has delivered a five-year pooled return of 24.4%, almost double US peers, a past result for the market as a whole.11 The gap between managers is far wider: among 2019-vintage funds on Carta at the end of 2025, a top-decile fund was at 3.01 times paid-in capital, the median 1.33 times and a bottom-quartile fund 1.02 times, mostly unrealised.12 How venture returns work explains why.
Where does venture fit in a client's portfolio?
With the client's other growth assets, as a small part of them. It shouldn't replace defensive assets, because a fund interest can't be sold to meet a bill.
Funded from growth assets, with cash kept aside for the calls
Cash and bonds
Meets bills, and the capital calls over the fund's first three to five years.
A venture fund
A small slice of the growth assets, often next to other private markets holdings.
Listed shares and property
The long-term growth exposure a client already has.
Never a stand-in for defensive assets. A fund interest can't be sold to meet a bill.
What to check:
- The money is locked up for 10 years or more, and terms can be extended.
- The client needs cash on hand for capital calls over the first three to five years, often at about ten business days' notice.13
- Concentration elsewhere matters. A client whose wealth is mostly in their own technology business already has a lot of startup risk.
- Fund interests are offered to wholesale investors only. The wholesale investor test sets out the thresholds.14
The size of the slice is covered in How much to allocate.
How do super funds, endowments and family offices use venture?
Inside a wider private markets allocation, sized to how long they can wait for their money. Australian super funds had about 4.9% of assets in private equity and venture combined, per the Australian Investment Council's 2025 pre-Budget submission, and very little of that is Australian venture.15 AustralianSuper's Australian venture commitments are about 0.34% of the fund, down from 0.38% in 2020, and 13 of the 20 largest funds have no public commitment at all.4 The funds cite the annual performance test and the liquidity needed for members switching funds.4,15
US university endowments expect to exist indefinitely and spent an average of 4.9% in the 2025 financial year.16 That year the largest had about 32% in private asset classes, against 3.4% for the smallest, with venture one part of that.5
Family offices sit in between. The 307 in the UBS Global Family Office Report 2026 (average net worth US$2.7 billion) had about 17% in private equity in 2025, 8% direct and 9% through funds, with venture inside both.17
The longer an investor can wait, the more it holds in private markets
None of these is a target for an individual; a 60-year-old client can't carry an endowment's illiquidity. What they share is a planned program spread across managers and years.
How does the 2027 CGT change affect venture's place in a portfolio?
It makes the structure matter more. Under law passed in June 2026, the 50% CGT discount ends from 1 July 2027 for individuals, trusts and partnerships; gains arising after that date are taxed on an inflation-adjusted cost with a 30% minimum tax.6,18 Gains on eligible ESVCLP investments held 12 months or more stay exempt, with up to a 10% offset on eligible contributions.1
The risk is unchanged; the client keeps more of a good outcome. See The ESVCLP guide and The 2027 CGT changes, and confirm each client's position with their tax adviser.
Frequently asked questions
On reported numbers, close to it: studies find correlations with listed shares around zero, such as AngelList's 0.0 against the Nasdaq and Invesco's -0.06. Over the long run the link is stronger, because private valuations update slowly and exits depend on market appetite, so long-run models such as J.P. Morgan's use about 0.6.
Both use similar fund structures, fees and ten-year terms. Private equity usually buys control of mature, profitable businesses, often with debt; venture buys minority stakes in young companies that are mostly years from a profit.
Yes. Most startups fail, a fund's result often rests on two or three companies, and the money is locked up for a decade or more. The gap between good and poor managers is also much wider than in listed shares.
With the client's other growth assets, as a small part of them, usually funded from shares and property exposure. It shouldn't replace cash or bonds, because a fund interest can't be sold to meet a bill.
Very little in Australian venture. AustralianSuper's Australian venture commitments are about 0.34% of the fund, and 13 of the 20 largest funds have no public commitment.
They expect to exist indefinitely and spend about 5% a year, so they can lock money away for a decade. The largest US endowments had about 32% in private asset classes in the 2025 financial year.
It doesn't change the risk, but it widens the tax gap. From 1 July 2027 gains lose the 50% discount for individuals, trusts and partnerships, while eligible ESVCLP gains stay exempt. Confirm the position with a tax adviser.
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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.
Sources
- Australian Taxation Office, ESVCLP tax incentives and concessions. ↩
- AngelList, Innovation isn't Correlated with the Markets (Abe Othman, 11 May 2020): 0.0 correlation between AngelList's seed portfolio monthly returns and the Nasdaq, 2015 to 2020, no significant lagged correlation; cites Invesco's -0.06 between venture and large-cap equity returns, and a very weak link between Cambridge Associates vintage TVPI and public market indices. ↩
- Hamilton Lane, Portfolio Construction Volume III: Risky Business (October 2024). Appraisal valuations change more slowly than traded prices, so reported private equity volatility understates economic volatility. ↩
- Tall Order, Super funds: where the bloody hell are you? (October 2026): AustralianSuper's Australian VC commitments at 0.34% of the fund; 13 of the 20 largest super funds have no public commitment to Australian VC. ↩
- Commonfund, Under Allocating to Private Strategies Could Shortchange Your Mission (April 2026), citing FY2025 NACUBO-Commonfund Study of Endowments data. ↩
- Australian Government, Budget 2026-27, Tax reform: CGT discount, minimum tax, negative gearing, venture capital. ↩
- Australian Taxation Office, Investment income: interest must be declared as income. ↩
- ASIC, REP 814 Private credit in Australia (22 September 2025), with media release 25-209MR: opaque remuneration and fee structures, valuation practices. ↩
- Jay R. Ritter, University of Florida, Initial public offerings: median age of IPOs and number of US IPOs by year, through 2025. ↩
- J.P. Morgan Asset Management, 2026 Long-Term Capital Market Assumptions, Australian dollar assumption matrix (data as at 30 September 2025): compound and arithmetic returns, volatilities and correlations over 10 to 15 years. Venture capital figures from the US dollar matrix of the same edition. ↩
- Side Stage Ventures and Dealroom, Australia Venture and Startup Report 2026: pooled returns, unicorns and decacorns per dollar, seed valuations, seed fund activity. ↩
- Carta, Q4 2025 VC Fund Performance (19 March 2026): TVPI by percentile for the 2017 and 2019 vintages. ↩
- Institutional Limited Partners Association, Enhancing transparency around subscription lines of credit (2020), including capital call notice periods. ↩
- ASIC, Certificates issued by a qualified accountant: net assets of at least $2.5 million or gross income of $250,000 in each of the previous two years; certificates valid for up to two years. ↩
- Australian Investment Council, Pre-Budget Submission 2025: 4.9 per cent of super assets in private equity and venture capital; liquidity buffers for member portability. ↩
- NACUBO, 2025 NACUBO-Commonfund Study of Endowments: average effective spending rate of 4.9% in FY25. ↩
- UBS, Global Family Office Report 2026: 307 family offices, average net worth US$2.7 billion; 2025 strategic asset allocation, private equity 8% direct and 9% funds. ↩
- Federal Register of Legislation, Treasury Laws Amendment (Tax Reform No. 1) Act 2026, as made 26 June 2026. ↩