The GEN Atlas Policy Deep Dive explores several examples similar policies introduced in different countries. By drawing out the subtle variations in approach and highlighting innovative ideas, we hope to learn more about the most effective approaches to policy making and offer a roadmap for other policymakers to learn from. Our analysis of startup support policy is built around eight overarching themes:
- Finance: New types of capital for startups and scaleups at the right time
- Education + Skills: Embedding enterprise and entrepreneurship into education and providing (both existing and potential) entrepreneurs with mentoring, training and support
- Market Access: Expanding access to markets for startups domestically and abroad
- Inclusivity + Culture: Ensuring that entrepreneurship is a culturally attractive vocation for all sections of society and in particular that people from disadvantaged groups have an equal opportunity to launch and grow a business
- Regulation: Removing regulatory barriers to innovation and startup success
- Ecosystem + Economic Development: Developing and managing local ecosystems to better support entrepreneurs, startups and scale-ups
- Science, Technology and Innovation: Utilizing the latest advancements in science and technology to improve productivity, boost economic growth and solve societal problems through innovation
- Policy Making: Maintaining a data-driven, effective and coherent policy making process that supports entrepreneurs and ensures public awareness of available programs
What is a fund of funds?
A fund of funds is an investment vehicle that allocates capital into a portfolio of underlying funds—such as venture capital, growth equity, private credit, or sector/thematic vehicles—instead of investing directly into companies, providing diversification, manager selection, and scale through a single platform managed by a general partner. Public versions of this model are widely used in innovation policy to act as cornerstone investors in private funds, crowd in additional limited partners, and professionalize markets via intermediated deployment rather than direct grants or loans. In Europe, the approach is institutionalized through a cornerstone LP model that channels equity and risk-sharing to specialist funds, while private-markets literature describes FoFs as limited partnerships layering a manager-level fee on top of underlying fund fees in exchange for access and portfolio construction.
Policy contexts where they emerge
Funds of funds tend to arise in a few repeatable policy contexts: first, ecosystem seeding, where governments need to catalyze a nascent VC market and build a bench of local managers—often via catalytic co‑investment terms or buyout options that enable a credible state exit once private capital deepens. Second, market repair aftershocks, where subordinated or asymmetric FoF structures de‑risk private LPs and restart fundraising cycles, typically with transparent mandates and minimum private matching. Third, scale and cohesion agendas, where continental or national platforms act as cornerstone LPs to mobilize institutional investors at volume while steering capital to priority themes (deeptech, climate) and regions via thematic windows and selection criteria. Finally, strategic industrial policy, where FoFs sit alongside direct and co‑investment tools to channel capital into targeted technologies while maintaining arm’s‑length governance by investing through professional fund managers rather than picking firms directly.
GEN Atlas has over 30 case studies of fund of funds from different countries and regions. You can explore them here. Of those 30 we have conducted a deeper analysis of 13 for this deep dive.
Common features and differences
Most fund-of-funds in these 13 cases share a common core: they act as cornerstone LPs that invest indirectly through professionally managed VC/PE funds, use clear mandates to target market gaps, and set crowd-in requirements that leverage public anchors to attract private capital at scale. They typically standardize governance with independent investment committees, milestone-linked capital calls, and eligibility criteria tied to sectors or firm stages, while publishing periodic reports on commitments, reach, and outcomes to reinforce transparency and additionality. Design features recur across models: catalytic terms that de-risk private LPs (e.g., subordinated “waterfalls,” buyout options, or public risk compartments), diversified toolkits when goals expand beyond VC (adding guarantees, securitisation, or direct/co-investments), and ecosystem supports such as accelerators or manager development to deepen GP capacity. Most operate arm’s‑length from ministers via agencies or development banks, emphasize thematic priorities like deeptech, climate, life sciences, and cohesion/regions, and measure results primarily on mobilized capital, funds backed, SMEs/startups supported, and selected firm-level metrics, with the largest platforms advancing quasi-experimental evaluations.
The 13 cases diverge mainly on mandate scope, incentive design, and the role of the state:
- EIF is a continental, multi‑instrument engine stacking equity with guarantees and securitisation to meet EU priorities
- Yozma is a minimalist catalytic design that used small minority stakes plus a time‑limited buyout option to jump‑start a nascent VC market with rapid government exit;
- Canada’s VCAP blended public–private capital via subordinated waterfalls across four privately managed FoFs to crowd in pensions and banks, while
- Germany’s Growth Fund compartmentalized risk to fit insurers’ constraints and move capital quickly into later‑stage VC;
- Saudi Arabia’s Jada and Mexico’s Fondo de Fondos are ecosystem‑builders backing a wide range of PE/VC managers in emerging markets, with Jada publishing SME/job reach and Mexico focused on market infrastructure like CKDs/CERPIs;
- Italy’s CDP Venture Capital mixes FoF sleeves with direct funds and a nationwide accelerator network to deepen pipeline and regional reach
- Britain’s BBI applies FoF logic to diversify SME finance through non‑bank lenders and regional angels rather than pure VC;
- Japan’s JIC is a strategic sovereign hybrid combining FoF with large industrial PE to drive sector consolidation,
- Nigeria’s NSIA shows a sovereign, ring‑fenced platform aimed at stabilization, savings, and infrastructure rather than classic VC FoF
- Beijing’s Zhongguancun FoF is a city‑region “hard tech” parent fund layering angel, growth, and M&A sub‑funds alongside university/R&D linkages—with the trade‑off that multi‑layer governance can slow decisions.
Impact measurement
Overall, impact measurement for funds of funds has improved in structure and rigor, but remains uneven on causal attribution and comparability across programs and contexts. Most large public LP platforms now use explicit theories of change and standardized results frameworks to track inputs, outputs, and outcomes through intermediaries—EIF’s Value-Added/impact frameworks and the EIB Group’s AIM are examples—yet translating these into robust estimates of ultimate impact and counterfactual additionality is still challenging at scale.
The strongest evidence comes where administrative data can be matched to beneficiaries for quasi-experimental studies; recent EIF working papers and evaluations show positive firm-level effects on employment, investment, and resilience, but emphasize the limits of multipliers and the need for better baselines and controls. By contrast, many national FoFs and sovereign platforms rely on deployment, leverage, and reach metrics (funds backed, capital mobilized, companies/jobs supported), which demonstrate scale and signaling effects but are weaker on causality and long-run ecosystem change; VCAP’s survey-based jobs and growth findings, Jada’s SME/job counts, and Zhongguancun’s portfolio financials illustrate these strengths and gaps. Methodological innovations are emerging—impact-linked carry, indicator standardization, and portfolio-level impact dashboards—but consistency and external validation vary, and cross-program comparisons are hindered by differing mandates (e.g., SME credit vs. VC equity), reporting scopes, and data availability.
Good governance and transparency lessons from funds of funds center on arm’s‑length decision‑making, standardized disclosure, and auditable selection and monitoring processes that the public can scrutinize. Leading platforms formalize independent investment committees, publish eligibility and scoring criteria, and adhere to group‑wide transparency policies covering what is disclosed, when, and how stakeholders can appeal—practices codified at EU level by EIF’s transparency framework and external reporting to responsible‑investment standards. Public audits stress that transparency means not only who received money and why, but also how funds were used and with what results; guidance from EU auditors highlights risks in opaque methodologies, discretionary scoring, and weak beneficiary disclosures, urging clearer documentation, consistent publication of decisions, and robust information systems.
The most transferable lessons are:
- publish ex‑ante criteria and IC minutes summaries
- disclose cornerstone terms and risk‑sharing structures
- maintain open data on commitments, beneficiaries, and outcomes
- embed complaints and whistleblowing channels
- and align with group transparency policies and PRI‑style reports to strengthen credibility, safeguard against politicization, and improve accountability.
Risks and pitfalls
Risks and failure modes for public fund-of-funds cluster around additionality, governance, incentives, and execution. The most common pitfalls are:
- Weak counterfactuals and over‑credited multipliers that blur whether private capital was genuinely crowded in or merely displaced, as flagged by auditors reviewing EU‑level instruments implemented via intermediaries;
- Overly generous public terms or unclear exit paths can distort fund economics and deter true market discipline; multi‑layered, state‑guided structures can slow decisions, complicate accountability, and reduce catalytic timing; thin GP benches and limited pipeline outside core hubs constrain absorption and raise the risk of underperformance;
- Politicized or opaque selection undermines credibility and can lead to adverse selection; measurement systems that stop at activity/output metrics make it hard to course‑correct;
- Regulatory/product rigidities (e.g., pension rules, instrument formats) can choke institutional participation—mitigations include independent ICs, calibrated buyout/subordination, risk‑segmented compartments, standardized reporting with counterfactual baselines, TA for emerging managers, and simplified mandate architectures.
State and city level
Though typically associated with national governance, state and city fund-of-funds can be implemented through existing treasury or commerce structures, pairing public anchors with competitively selected external managers to invest indirectly in local VC, growth equity, and credit funds that back firms with a clear in‑state footprint. Illinois’ model shows how an evergreen vehicle inside the State Treasurer’s Office can set policy, hire a program administrator and investment consultant via open procurement, cap exposure per manager, and reinvest returns to sustain cycles; it formalizes DEI and ESG criteria, requires quarterly/annual reporting, and uses an advisory council for independent oversight, all while insisting underlying funds demonstrate material Illinois operations. This governance-light, rules‑based approach scales with the state balance sheet, enabling 20–25 diversified commitments per vintage and long‑run recycling without building a new agency.
Cities and smaller states often emphasize catalytic matching and inclusion over evergreen balance‑sheet scale, blending federal SSBCI dollars with private capital and offering sidecar or higher matching rates for women- and minority‑led ventures to pull angels and local lenders into early rounds; Kansas’ GROWKS illustrates a multi‑strand design that matches equity and loans, mobilizes CDFIs and community partners for outreach, and revolves repayments into future cohorts. Compared with national programs, sub‑national funds tend to localize eligibility (requiring headquarters or operations in‑jurisdiction), use smaller ticket sizes with tighter manager caps, and lean more on community pipelines and technical assistance; by contrast, national vehicles like EIF or VCAP operate at continental or country scale with broader thematic windows, uniform additionality frameworks, and deeper reliance on institutional LP crowd‑in rather than targeted matching for underserved founders.
Closing thoughts
A well‑designed fund of funds is ultimately a policy hinge: it translates big goals into disciplined, arm’s‑length capital deployment, then learns and adapts as markets respond. The next wave should double down on clarity of mandate, calibrated incentives, and radical transparency—publishing ex‑ante criteria, open data on commitments and outcomes, and independent evaluations with counterfactuals—while tailoring structures to context, from city‑level matching models to evergreen state treasuries and national cornerstones. Done this way, funds of funds can crowd in durable private capital, strengthen local manager benches, and channel investment to priority sectors and regions, all without blurring governance lines or sacrificing market discipline.
Explore each of the 30 fund of fund programs documented on Atlas here.