Capital Call
Also known as Drawdown, Draw Down, Capital Drawdown, Capital Call Notice
A capital call is a formal notice from the GP requiring LPs to wire a portion of their committed capital, typically within 10 business days. Funds call capital deal-by-deal rather than upfront so LP capital is only at work when needed.
In depth
A capital call converts an LP's commitment into actual cash in the fund's account. Commitments are a promise; capital calls are the execution. The GP issues a call notice when a deal is imminent or fund expenses come due, the LPs wire their pro-rata share within the notice period (typically 10 business days), and the cash is then deployed or paid out.
The mechanics are tightly governed by the LPA. The notice format is largely standardized by ILPA's Capital Call & Distribution Template, which institutional LPs require so their back offices can reconcile dozens of fund commitments without bespoke processing. Each notice references the investment or expense, shows the called amount as a percentage of total commitment, and provides a running total of called and uncalled capital.
Why it matters
LPs do not hold idle cash at the fund. They hold a commitment liability and meet it when called. This has two consequences. First, LPs run cash-management programs to make sure capital calls can be funded on 10 days' notice without selling other holdings at the wrong moment. Second, IRR is computed on the dates capital is called and distributed, which is why deferred calls boost IRR even when total proceeds are unchanged.
Worked example
A $5M LP commitment in a fund that calls capital over four years, with a typical first-year pace:
| Call # | Date | Amount called | Cumulative called | % of commit |
|---|---|---|---|---|
| 1 | 2026-Q1 | $500K (10%) | $500K | 10% |
| 2 | 2026-Q2 | $400K (8%) | $900K | 18% |
| 3 | 2026-Q3 | $300K (6%) | $1,200K | 24% |
| 4 | 2026-Q4 | $500K (10%) | $1,700K | 34% |
By end of year one the LP has wired $1.7M of its $5M commitment. The remaining $3.3M sits as uncalled commitment for years two through four. If the LP failed to fund Call #3, the LPA default mechanic could charge 10% interest on the unfunded amount and, after a cure period, dilute the LP's interest by selling a portion to other LPs at a discount.
Frequently asked
How much notice does a GP have to give for a capital call?
10 business days is the ILPA-recommended standard and the most common LPA term. Some LPAs allow as short as 5 business days; some sophisticated LPs negotiate 15 days. The notice period is in the LPA and is non-negotiable once signed.
What goes in a capital call notice?
ILPA's Capital Call & Distribution Template specifies: total amount called, due date, wire instructions, fund-level use of proceeds, cumulative called and uncalled commitment, and any expense allocation. Most institutional GPs follow the template line by line.
What happens if an LP fails to fund a capital call?
Defaulting LPs face penalty mechanics in the LPA: interest charges (often 10%+), forfeiture of a portion of their interest, forced sale of their LP stake at a discount, and exclusion from future distributions. Default is rare; remedies are severe by design.
Why do funds use capital calls instead of taking all the money upfront?
Idle capital drags down IRR. Calling capital only when investments are made keeps LP capital deployed elsewhere until needed and lets the fund's IRR reflect deployed dollars rather than committed dollars.
Are management fees called separately?
Usually called alongside investment-deployment calls in one notice. Some GPs run quarterly fee-only calls so LPs can budget cash; others bundle fees into deal calls to minimize call frequency. Both approaches are standard.