Capital Call

In private equity, venture, private credit and real estate funds, investors commit capital up front but fund it over time. When the fund needs money for an investment, fees or expenses, the general partner issues a capital call (also called a drawdown notice) specifying the amount due from each investor, the purpose, the wire instructions and the due date, commonly around ten business days as set out in the LPA.

Each investor’s share is normally pro rata to commitment. The call reduces the investor’s unfunded commitment and increases contributed capital in their capital account. Calls also affect performance measures such as IRR, which is why some funds use subscription credit lines to delay calls.

Pitfalls include calculation errors after secondary transfers or late closings, unclear purpose breakdowns, wire instructions sent without call-back verification (a common fraud vector), and weak tracking of defaulting or late investors. Every call should reconcile to commitments and be reviewed under maker-checker controls before release.

Example

A fund has $100M of total commitments and calls 15%. An investor with a $5M commitment receives a notice for $750,000. After funding, their contributed capital rises by $750,000 and their unfunded commitment falls from $5M to $4.25M.