Capital Call
Private Equity glossary · Private Equity Fundamentals
Definition
A demand by the GP requiring LPs to fund a portion of their committed capital, also called a drawdown. Typical notice period is 10 business days; the call specifies amount and purpose (investment funding, management fee, fund expenses, organizational costs). A buyout fund typically calls capital at a roughly linear pace over Years 1-4 of the investment period, with some acceleration in Years 2-3. Subscription credit lines can defer LP capital calls by 6-12 months and inflate reported IRR by 100-200 bps; ILPA has called for clearer disclosure.
Capital Call in plain English
When investors join a private-equity fund, they don't hand over all their money on day one — they promise it and then send it in chunks as the fund actually needs it. A 'capital call' is the official demand from the managers (the GP) saying: 'We found a company to buy — please wire your share within about 10 business days.' Think of it like agreeing to split a house purchase with friends: you all commit up front, but nobody transfers cash until there's an actual house to buy. One insider trick: managers can borrow from a bank first and call your money months later, which makes their reported returns look faster and better than they truly are — regulators now push for honesty about this.
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