---
title: "What Is Annex Fund?"
term: "Annex Fund"
description: "An annex fund is a separate pool of capital raised alongside a main fund to hold specific investments, follow-ons, or overflow deals that do not fit the primary fund's constraints."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/annex-fund
---

# What Is Annex Fund?

> An annex fund is a separate pool of capital raised alongside a main fund to hold specific investments, follow-ons, or overflow deals that do not fit the primary fund's constraints.

An **annex fund** is an additional fund vehicle raised next to a flagship fund to invest in opportunities the primary partnership cannot accommodate under its LPA limits.

## How it works

Triggers include exhausted main-fund capital, investment-period expiry, concentration limits, or LP mix restrictions. The GP offers existing LPs first rights to commit to the annex under parallel terms—sometimes lower fees to reward loyalty. Annex funds may focus on follow-ons for winners or a single large co-investment.

Unlike an [AIV](/glossary/alternative-investment-vehicle-aiv) holding one asset for tax reasons, annex funds often behave like mini-funds with their own capital pool and deployment clock.

## Why it matters

- **Founders:** Your lead investor may allocate from Fund IV or Fund IV Annex—confirm capacity and decision-makers.
- **Investors:** Watch for fee duplication and whether annex performance rolls into GP track record marketing.
- **GPs:** Transparent annex rationale preserves LP trust; opaque annexes feel like fee grabs.

## Common mistake

LPs auto-committing to annex funds without reading differentiated terms. Annex is not always identical to the main LPA copy.

## Related ideas

Co-investment funds, continuation vehicles, [alternative investment vehicle](/glossary/alternative-investment-vehicle-aiv), and follow-on reserves.

## FAQ

### What is an annex fund in simple terms?

A sibling fund created when the main fund is full, out of investment period, or restricted from a deal. The GP raises an annex to participate anyway, often with similar strategy but separate legal docs.

### Why do annex funds matter?

They let GPs pursue hot deals without bending main-fund rules. LPs decide whether to participate; annex economics and fee stacking deserve scrutiny.


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Source: https://venturecapitaltracker.com/glossary/annex-fund