Capital call (drawdown)
A manager's notice requiring investors to pay in part of their commitment by a set date.
The notice states the amount, the due date, and usually what the money is for: investments, fees, or expenses. Calls arrive with little warning and short deadlines, which is why the unfunded commitment across a portfolio has to be tracked as a live number rather than reconstructed at quarter end.
The arithmetic
Unfunded commitment after the call = unfunded before − the part of the call that counts against the commitment
A call is usually stated as a percentage of commitment. Fees the LPA charges on top of the commitment, and equalisation interest on a late closing, are paid with the call but do not reduce unfunded commitment.
A worked example
An LP has committed €2,000,000 and €1,100,000 has been called so far, so €900,000 is unfunded. A notice calls 7.5% of commitment, €150,000: €120,000 for a new investment and €30,000 of management fee, due in ten business days. If the LPA calls fees against the commitment, unfunded falls to €750,000. If it charges them on top, unfunded falls only to €780,000, and the €30,000 is still cash going out.
The comparisons people search for
- Capital call vs distribution
A call moves money from the investor to the fund; a distribution moves it back. Both arrive as notices from the same administrator, often in the same inbox, and only the call has a deadline that costs interest if missed.
- Capital call vs drawdown
The same thing. "Drawdown" is the more common word in European LPAs, "capital call" in American ones, and German private markets mostly uses the English term or Kapitalabruf.
- Is a fee call a capital call?
Yes, if the LPA draws fees from the commitment: it is called and paid like any other call and reduces unfunded commitment. If fees are charged on top, the payment arrives in the same notice but leaves unfunded unchanged.
- What happens if a call is not paid on time?
Interest usually runs from the due date, and most LPAs give a cure period before default provisions apply. A phone call to the administrator before that period runs is usually enough; the sequence is set out in our article on missed calls.
Worth knowing
- Also called a drawdown, or a Kapitalabruf in German.
- Notice periods are set in the LPA; ten business days is common.
- Recallable distributions can be called again, which is why a call can arrive after a spreadsheet says the commitment is used up.
- Once the notice arrives, the amount counts as called even before it is paid; the unpaid part is money owed, not unfunded commitment.
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