Annex Fund

An Annex Fund (also called an opportunity fund or growth fund) is a supplemental investment vehicle raised by a GP alongside or subsequent to their main fund, specifically designed to make larger follow-on investments in the main fund's most successful portfolio companies. The annex fund allows the GP to maintain or increase ownership in breakout companies without depleting the main fund's reserves. Annex funds are typically larger than the main fund's follow-on allocation and invest only in companies already in the main fund's portfolio. They often have modified economics—reduced management fees and sometimes lower carry—since the GP is investing in known quantities rather than sourcing new deals. LPs in the main fund usually receive priority access to the annex fund. The structure has become popular among seed and early-stage funds that identify winners requiring significantly more follow-on capital than the main fund can provide.