Unfunded commitment

The formula

Unfunded commitment = commitment − capital called against the commitment + recallable distributions

Fees that the LPA charges outside the commitment are cash going out, but they do not reduce unfunded. Equalisation interest on a late closing usually sits outside it too.

A worked example

An LP commits €5,000,000. The fund has called €3,200,000 against the commitment and a further €150,000 of fees outside it. It has distributed €900,000, of which the notice marks €400,000 as recallable. Unfunded commitment is 5,000,000 − 3,200,000 + 400,000 = €2,200,000. A spreadsheet that ignores the recallable part shows €1,800,000; one that also subtracts the outside fees shows €1,650,000. Both understate what the fund can still call.

The comparisons people search for

Unfunded commitment vs paid-in capital

Paid-in capital is what has gone out to the fund; unfunded is what can still go out. They only add up to the commitment when there are no recallable distributions and no fees outside the commitment, which is rarer than people assume.

Unfunded commitment vs dry powder

Dry powder is the fund-level view: capital the manager has raised and not yet invested, across all investors. Unfunded commitment is one investor's view: what that LP can still be asked to pay. A fund can have little dry powder while an LP's unfunded stays high, for instance after recallable distributions.

Does a recallable distribution increase unfunded commitment?

Yes, by the recallable amount, for as long as the recall right lasts. That is the most common reason a capital call arrives that, by a family office's own spreadsheet, should not exist.

Will all of it be called?

Rarely. After the investment period a fund typically calls only for follow-on investments, fees and expenses, and part of the commitment is never drawn. How much remains callable is set in the LPA, which is why unfunded in an old fund means something different from unfunded in a young one.

Worth knowing

• Also called uncalled capital or remaining commitment.
• Usually a line on the capital account statement, but recompute it: managers differ on whether recallables are included.
• When a fund stake is sold as a secondary, the buyer takes over the unfunded commitment.
• Summed across funds and entities, it is the liquidity reserve a family office has to plan for, by vintage rather than as one pot.