Recycling Limit
A recycling limit caps how much a GP can reinvest proceeds by re-calling or reusing distributions within a fund.
Allocator relevance: High — recycling changes effective fund size, duration, liquidity timing, and sometimes fee economics.
Expanded Definition
Recycling allows early proceeds (from realizations, repayments, or income) to be reinvested rather than distributed, often to maximize deployment efficiency. Limits are commonly defined as a % of commitments and may be constrained by time windows (e.g., only during investment period) and eligible sources (e.g., only return of capital).
Allocators model recycling because it affects when they receive net cash back and how long capital remains at risk.
Decision Authority & Governance
Governance requires clear LPA rules, transparent reporting of recycled amounts, and predictable communication. Allocators assess whether recycling aligns with strategy discipline or whether it is used to maintain fee base or extend exposure without sufficient justification.
Common Misconceptions
- Recycling is inherently negative.
- Recycling always increases fees unfairly.
- Limits are unimportant if performance is strong.
Key Takeaways
- Recycling affects liquidity and risk duration materially.
- Limits and windows are key diligence terms.
- Reporting transparency determines trust.