Glossary · Fund life

What is a capital call?

A capital call is a notice asking investors to send part of their commitment, usually a week or two before the money is needed. It is also called a drawdown.

In practice

Calls fund new investments, fees and fund expenses, and the notice states the amount, purpose and due date. Each investor pays its pro rata share, and the LPA sets the notice period and default remedies, such as forfeiting part of the interest. Funds often bridge calls with a subscription line, which delays the cash needed from investors. Not the same as a distribution.

An example

Round numbers, not a real fund

Say an investor has committed $50 million. The fund finds a deal and calls 10%. The investor wires $5 million, and $45 million stays to be called.

Why it matters

Investors have to keep cash ready, and a missed call can carry penalties.

A definition, not advice; where usage varies the entry says so. Something wrong? Tell the desk.

Related terms

CommitmentA commitment is the total amount an investor legally agrees to provide to a fund, which the manager draws down gradually through capital calls.
Subscription lineA subscription line is a short-term loan to a fund, backed by investors’ unfunded commitments, that lets the manager invest before calling investors’ cash.
LPAThe limited partnership agreement, or LPA, is a private fund’s main contract. It sets the fees, carry, investment limits and the rights of the manager and the investors.
Investment periodThe investment period is the first years of a fund, often about five, when the manager can make new investments. Afterward it mostly manages and sells what it holds.
RecyclingRecycling lets a fund reinvest proceeds from early sales instead of distributing them, so it can invest more than investors committed, usually up to a stated limit.

The terms, in the news each morning.

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