Capital Call
A capital call is a request by a fund for LPs to contribute a portion of their committed capital.
Allocator relevance: Directly affects liquidity planning and reveals operational discipline through accuracy, notice, and cadence.
Expanded Definition
Capital calls draw committed capital over time to fund investments, fees, and expenses. Terms governing timing, notice periods, default remedies, and eligible uses are typically defined in the LPA and subscription documentation.
Capital calls are operationally sensitive: errors or unclear notices create friction and can erode LP trust even when investment performance is strong.
How It Works in Practice
LPs receive a notice specifying amount due, due date, and wiring instructions. Calls may be funded with cash on hand, liquid sleeve rebalancing, or short-term liquidity facilities depending on the allocator’s liquidity framework.
Decision Authority and Governance
Strong manager operations include clear internal approvals, administrator checks, and traceability. LP governance includes monitoring unfunded exposure and ensuring capital call obligations align with liquidity budgets.
Common Misconceptions
- A commitment is paid upfront at close.
- Capital calls are only for new investments.
- Managers can call capital without clear constraints.
Key Takeaways
- Calls draw commitments over time.
- Cadence impacts LP liquidity planning.
- Operational quality shows up in the details of each call.