Capital Calls

Issued by General Partners to collect funds from investors (also known as Limited Partners or LPs). When investing in closed-end private equity, venture capital, and certain real estate and infrastructure funds, the LPs commit to investing a predetermined amount of capital at the onset of the fund. The firm makes multiple capital calls to collect the pledged capital throughout the fund’s investment period.

Private fund managers (also known as General Partners or GPs), use the capital call structure to maximize capital efficiency. Capital is typically called once an investment(s) is identified or as needed to cover the fund’s operating expenses. The capital call structure gives LPs the flexibility to spread out their investment over time and reduces the negative performance impact of cash drag.

Notice of an upcoming capital call is typically issued by GPs 7-10 days in advance, allowing time for LPs to transfer funds. Failure to transfer funds as required can result in a default, and the LP may be subject to penalties as stipulated in their limited partnership agreement.