![]() ![]() Indeed, it is very often the case that a fund is never quite 100% drawn, because the fund manager will retain some element of the drawable funds throughout the life of the fund to be able to pay for potential or planned follow-on funding rounds, as they arise, or to pay fees/expenses.ĭuring the initial investment period of a private equity fund, it is usual for management fees to be levied on the total amount committed to the fund – not the amount actually drawn and invested. It is not uncommon to have a fund that holds a first legal close on commitments, where monies are not drawn down for several months. It is therefore possible (depending on the investment activity of the fund) that a Limited Partner doesn’t need to pay money to fund its commitment for some considerable time (other than for set up and operating fees). The unusual structure of private equity fund investing means that the investors who are Limited Partners in a partnership fund make “commitments” to a fund, with that committed capital “drawn down” or “called” in coordination with the fund making an investment, or incurring expenses borne by the Limited Partners, as detailed in the Limited Partnership Agreement (LPA). It is the latter which will occupy us in this article. In the world of private, closed ended funds, such as private equity, however, the term is broadly synonymous to a “(capital) call” – the process of drawing monies (capital and loans) into the fund. ![]()
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