A capital call (also known as a drawdown) is a formal request from a general partner to its limited partners to contribute a portion of their committed capital to the fund. When an LP commits $100 million to a fund, that capital is not transferred upfront. Instead, the GP issues capital calls over the investment period (typically 3-5 years) as investment opportunities arise.
Capital calls are typically issued with 10-15 business days' notice, though the specific terms are defined in the fund's limited partnership agreement (LPA). The GP will specify the amount, purpose (investment, fees, or expenses), and payment deadline. LPs who fail to meet capital calls face severe penalties including forfeiture of their interest, reduced participation, or legal action.
The pace and pattern of capital calls is a key portfolio management consideration for LPs. Over-commitment strategies, where LPs commit more capital than they have available, rely on the assumption that not all funds will call capital simultaneously. Our fund performance database includes capital call data that helps model expected drawdown patterns by strategy and vintage year.
Capital call lines of credit (subscription facilities) have become ubiquitous in private markets. These revolving credit facilities allow GPs to fund investments immediately using bank debt rather than calling LP capital, which can take weeks. The GP subsequently issues a capital call to repay the facility. While this improves operational flexibility, it also inflates reported IRR by delaying the start of the cash flow clock.
From a GP stakes perspective, capital call patterns provide insight into deployment pace, fundraising health, and LP satisfaction. A GP that calls capital quickly is actively deploying, while slow drawdowns may indicate difficulty finding attractive investments. Our platform tracks these signals across the GP universe.
Capital calls also create secondary market opportunities. LPs facing unexpected liquidity needs may sell their fund interests on the secondary market to avoid potential default on future capital calls. This intersection of capital call obligations and secondary market liquidity is an important dynamic in private markets portfolio management.