Glossary · Fund life

What is a subscription line?

A subscription line is a short-term loan to a fund, backed by investors’ unfunded commitments, that lets the manager invest before calling investors’ cash.

In practice

The facility is set out in the LPA, which caps borrowing and how long a draw can stay outstanding, often 90 to 180 days. Lenders underwrite the investors' creditworthiness and their obligation to fund, not the portfolio. Also called a capital call line or credit facility. Distinct from a NAV loan, which is secured on portfolio assets.

An example

Round numbers, not a real fund

Say a fund borrows $50 million on its subscription line to buy a company, then calls $50 million from investors three months later to repay it.

Why it matters

It makes a fund’s reported returns look better, and investors weigh that against its cost and risk.

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

Related terms

Capital callA 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.
NAV loanA NAV loan is borrowing by a fund against the value of the investments it already owns, rather than against investors’ unfunded commitments.
IRRIRR, internal rate of return, is the yearly return that accounts for when money goes into and comes out of a fund, so earlier payouts raise it.
CommitmentA commitment is the total amount an investor legally agrees to provide to a fund, which the manager draws down gradually through capital calls.
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.

The terms, in the news each morning.

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