Instead, the firm will identify investment opportunities and make capital calls accordingly, only withdrawing however much cash they need at the moment. The firm retains the right to all of that $10 million, but in almost every instance, Investor X will not be expected to pay it out all at once. Let’s say Investor X commits $10 million to a firm. When investors become limited partners with a private equity firm, both sides agree to a maximum investment amount (also known as committed capital). Here we will discuss the basics of capital calls, some potential risks to consider, and strategies to ensure that any capital calls you need to make will be completed in a safe and secure manner. Historically, they have been used primarily by real estate funds, but they are becoming more commonplace across all types of private equity.Īs with any private equity transaction, capital calls require that multiple parties have access to documents containing a good deal of sensitive information. In essence, they are mobilizations of capital prompted by the firm and funded by the investors. Capital calls are an essential instrument of private equity, and occur with regularity between investment firms and their limited partners.

Committed capital