Fund Structure
Allocation
The amount of capital an LP commits to a specific asset class or fund — e.g., a university endowment allocating 15% of its portfolio to venture capital.
Allocation refers to the portion of a portfolio assigned to a particular asset class, fund, or investment strategy. For LPs like endowments and pension funds, the allocation to venture capital is a strategic decision made by the investment committee, typically ranging from 5-20% of total assets. Within a VC fund, allocation decisions refer to how much capital to deploy into each portfolio company. For hot deals, allocation is often constrained — GPs may want to invest more than the startup will allow. Managing allocation across a fund's portfolio is a core part of portfolio construction strategy.