Glossary · Fund lifecycle

Unfunded Commitment

Also called: uncalled capital · remaining commitment · undrawn commitment

An unfunded commitment is the portion of an investor's capital commitment to a fund that has not yet been called and that the general partner may still draw under the limited partnership agreement.

Publisher: Altss LLCPublished 2026-01-12Content modified 2026-10-01

ALTSS-LIFE-002

If an LP promised $20 million and has paid $12 million, roughly $8 million is unfunded. That money stays with the LP but must be available when the GP calls it. Unfunded commitments are therefore a contingent liability: they do not earn the fund's return until called, yet they must be planned for.

Formula

Unfunded commitment at date t

Unfunded = commitment − contributions counted against the commitment + recallable distributions − commitments released or cancelled

C: capital commitment
PIC_t: cumulative contributions counted against the commitment up to t
R_rec,t: cumulative distributions that the LPA makes recallable and that have not lapsed
X_t: commitments released by the GP or cancelled (for example on early termination of the investment period, or by default forfeiture)

This is the contractual unfunded amount. The economically expected unfunded amount is usually lower once the investment period has ended, because the remaining calls are limited to defined purposes. Fund administrators report the contractual figure on the capital account statement.

What unfunded capital can still be called for

During the investment period, unfunded commitments can be called for any purpose the limited partnership agreement (LPA) permits. After it ends, most LPAs restrict calls to follow-on investments (often capped), transactions committed before the end of the period, the management fee, fund expenses, indemnities and other liabilities. A fund in its harvest years may therefore report a large contractual unfunded amount of which only a fraction will realistically be drawn. LPs model both the contractual and the expected figure.

Recallable distributions

Many LPAs let the GP recall some distributions, commonly returns of capital from investments realised soon after they were made, or amounts distributed and later needed for fees or indemnities. Recallable amounts are added back to the unfunded commitment. An LP that books every distribution as permanent can understate its true remaining obligation. See recallable distributions.

LP unfunded commitment vs fund dry powder

Unfunded commitment is an LP-level measure of what each investor may still be asked to pay, including amounts that will fund fees and expenses. Dry powder is a fund-level or market-level measure of capital available for new investments. Summing LP unfunded commitments across a fund approximates its uncalled capital, but not its investable capital.

Liquidity planning and the denominator

Unfunded commitments are a liability that must be met from liquid assets or distributions. LPs project calls and distributions with cash flow forecasting models such as the Takahashi-Alexander model, and test the ratio of unfunded commitments to total assets and to liquid assets. When public markets fall, a rising private-asset weight (the denominator effect) can coincide with continued calls, which is the scenario stress tests are built around.

Unfunded commitments in secondaries and financing

In an LP-led secondary sale, the buyer assumes the unfunded commitment, so pricing and buyer credit both depend on it (see secondary pricing). Subscription-line lenders lend against the uncalled commitments of eligible investors, applying advance rates by investor type.

Worked examples

Illustrative secondary purchase with unfunded commitment attached

A secondary buyer acquires an LP interest with NAV of $10m and an unfunded commitment of $5m at a 10% discount to NAV. It pays $9m, but its total exposure is $14m because it also assumes the obligation to meet future calls. Pricing a secondary on NAV alone understates the capital the buyer has put at risk.

Unfunded commitments relative to total assets

A pension plan with $1,000m of total assets has $150m of unfunded commitments across its private funds. Unfunded commitments equal 15% of plan assets, the figure liquidity policies typically test against available liquid assets and expected distributions.

Examples are illustrative; figures are not market data.

Not the same as

Dry Powder: Dry powder is capital available to a fund (or the market) for new investments; unfunded commitment is the LP's remaining callable obligation, including amounts for fees and expenses.
Capital Commitment: The commitment is the total promise; the unfunded commitment is the part not yet drawn.

Common mistakes

Treating the contractual unfunded amount of an old fund as fully callable in liquidity models.
Forgetting recallable distributions when computing remaining exposure.
Assuming unfunded capital can only be used for new investments; fees and expenses are usually called from it too.
Valuing a secondary purchase as a percentage of NAV without adding the unfunded obligation to total exposure.

Edge cases

Excused LPs do not fund their share of an excluded investment; their unfunded commitment is unchanged but other LPs' calls rise.
A defaulting LP may forfeit its unfunded commitment, reducing fund size.
Funds that call fees outside commitments (rare) report unfunded commitments that do not decline with fee payments.

Questions

Does unfunded commitment earn a return?

No. Until called it remains the LP's own money, invested however the LP chooses. Only contributed capital is exposed to the fund's return.

Why does my unfunded commitment go up after a distribution?

Because the LPA made part of that distribution recallable, adding it back to the amount the GP may call.

Sources

ILPA Reporting Template (v. 2.0). Institutional Limited Partners Association, ILPA, v2.0 released 21 January 2025 under the Quarterly Reporting Standards Initiative (QRSI). Status: Current; ILPA recommends implementation from Q1 2026 (checked 2026-10-01). Suggested Guidance pp. 10, 17 (Capital Account Statement) — supports: Capital account statement reconciles beginning to ending unfunded commitment each quarter
Enhancing Transparency Around Subscription Lines of Credit. Institutional Limited Partners Association, ILPA, June 2020 (follows the June 2017 guidance Subscription Lines of Credit and Alignment of Interests). Status: Current (checked 2026-10-01). pp. 2-3 — supports: Disclosure of an LP's unfunded commitment collateralised by a subscription facility; facilities reduce the cadence of capital calls
ILPA Model Limited Partnership Agreement (Whole of Fund and Deal-by-Deal versions). Institutional Limited Partners Association, ILPA, Whole of Fund first released October 2019, updated July 2020; Deal-by-Deal version and term sheet released 22 July 2020. Status: Current (checked 2026-10-01). WOF Sec. 1.1 ('Remaining Commitment'); Secs. 6.6.4.4, 7.4 — supports: Remaining commitment = commitment less contributions plus returned contributions; a defaulting partner's commitment may be reduced, reducing aggregate commitments; after the commitment period drawdowns are limited to fund expenses, capped follow-ons and committed deals

8 terms

9 terms

Concept record

Concept ID: ALTSS-LIFE-002
Classification: Fund lifecycle · Portfolio construction
Topics: Fund terms & economics · Portfolio construction
Version: 2.0.0
Last reviewed: 2026-10-01
Structured data: JSON