Commitment Pacing

Commitment pacing is the allocator discipline of deciding how much to commit each year to illiquid funds (PE, VC, real assets, private credit) to maintain target exposure over time. It’s not a target allocation statement. It’s an operating plan for commitments, capital calls, distributions, NAV drift, and liquidity coverage—especially when markets move against you.

From an allocator perspective, pacing is one of the most revealing signals of maturity. High-quality allocators don’t “pick funds.” They run a program. Pacing is how that program avoids over-committing in strong markets and freezing in weak ones.

How allocators define pacing risk drivers

Allocators evaluate pacing through:

• Commitment budget: annual capacity by strategy and vintage
• Call/distribution assumptions: base + stress cashflow curves
• Vintage diversification rules: limits on single-year concentration
• Liquidity coverage: buffers for calls when distributions slow
• Denominator effect sensitivity: policy for target drift after sell-offs
• Re-up vs new manager capacity: how many “new slots” exist per year
• Exposure management tools: secondaries, pacing slowdowns, rebalancing

Allocator framing:
“Is private markets exposure governed by a model—or by whatever feels attractive this year?”

Where pacing matters most

• portfolios with meaningful illiquid exposure
• periods where distributions slow (down cycles)
• rapid public market declines that trigger denominator effects
• strategies with long duration or heavy follow-on needs

How pacing changes outcomes

Strong pacing discipline:

• avoids vintage concentration and performance chasing
• prevents cash stress and forced selling
• keeps manager selection consistent and slot-based
• reduces late-stage reversals caused by “capacity is full”

Weak pacing discipline:

• over-commits in bull years, freezes later
• relies on distributions that disappear in stress
• causes “soft no” outcomes due to hidden capacity constraints
• produces incoherent exposure and governance blowback

How allocators evaluate pacing discipline

Conviction increases when managers/allocators:

• show historical pacing vs policy and explain deviations
• stress test calls and distributions explicitly
• separate “desire to commit” from liquidity reality
• demonstrate how they handle being over/under target

What slows allocator decision-making

• “we decide opportunistically” with no pacing model
• reliance on distributions as guaranteed funding
• inability to explain how calls are funded in stress
• no plan for denominator effect management

Common misconceptions

• “Targets are enough” → targets without pacing create drift.
• “Pacing is just a spreadsheet” → it’s governance + behavior.
• “We can always slow later” → down-cycle freezes destroy program continuity.

Key allocator questions during diligence

• What is your annual commitment budget by strategy?
• What stress assumptions do you use for distributions and calls?
• How do you handle denominator effects?
• How many new managers can you add per year—and why?
• What tools do you use when private exposure drifts above target?