Commitment Period
Private Equity glossary · Private Equity Fundamentals
Definition
The period during which the GP may call capital for NEW platform investments — typically Years 1-5 of fund life (sometimes extended to Year 6). Also called the investment period. During the commitment period, management fees are charged on committed capital (the full pledged amount); at end of investment period, no new platform investments may be made (though follow-ons in existing portfolio companies continue), and management fees step down to a percentage of invested cost of unrealized investments.
Commitment Period in plain English
When investors pledge money to a PE fund, the manager doesn't spend it all at once — the commitment period (usually the first 5 years, sometimes 6) is the window when the manager is allowed to go out and buy brand-new companies. It's like a shopping trip with a fixed timer: while the clock runs, the manager can pick up new businesses and charges fees on the full amount you pledged, even the part not yet spent. Once the timer ends, no new companies can be bought (though they can still add money to ones they already own), and the fee shrinks — now it's charged only on the money actually tied up in deals still being held. This structure pushes managers to invest thoughtfully but promptly.
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