What is a capital call is the question an investor asks on receiving their first one and a general partner asks on having to issue it, and the answer is the same from both sides. A capital call is the fund's request for part of the money an investor committed, expressed as a percentage of the commitment so that every investor pays the same share, stated on a notice with a due date, and reconciled when the wire arrives. This page explains the call from the fund's side, what the notice has to state, and how each figure on it is computed, using the worked example on this site's own capital call worksheet.
The commitment is promised; the call is when part of it is asked for
An investor in a fund does not pay their commitment on signing. They promise it, and the fund calls it in pieces over the investment period as it needs money for investments, fees and expenses. Each piece is a capital call, and because every investor promised a different amount the call is decided as a percentage of commitment and then computed per investor. A ten percent call means every investor sends ten percent of what they promised; on this site's worked example an investor with a five million dollar commitment sends five hundred thousand dollars.
What the notice states
Five figures and a date. The investor's commitment, what has been called from them before this notice, this call's percentage and amount, what will have been called after it, and what remains uncalled. On the worked example those read five million dollars committed, one million seven hundred and fifty thousand called before, a ten percent call of five hundred thousand, two million two hundred and fifty thousand called after, and two million seven hundred and fifty thousand uncalled. The due date comes from the notice period in the partnership agreement, and the purpose of the call, investments or fees or expenses, is usually stated too.
How the fund computes it for every investor at once
The percentage is one decision; the arithmetic is per investor. Amount due is commitment times the percentage. Called after is called before plus the amount. Uncalled is commitment minus called after. Percent called after is called after over commitment, forty-five percent on the example. A fund with thirty investors computes thirty notices from one percentage and thirty commitments, which is why the record has to hold the commitment and the calls to date per investor rather than a fund-level total, and why a notice retyped from the last one is the commonest way an investor is called for the wrong amount.
What happens after the notice
The investor wires the amount by the due date; the fund reconciles the wire against the notice and records the call as received; the investor's called-to-date rises and their uncalled commitment falls. An investor who does not pay is in default under the agreement, with consequences it spells out, which is why the notice and its date are kept as sent. At the quarter end every received call adds to paid-in capital, the figure the fund's DPI, RVPI and TVPI are computed over.
Questions people ask about what is a capital call
Is a capital call the same as a drawdown?
Yes. Drawdown is the same request named from the agreement's side; capital call is the notice the investor receives. Both mean part of the commitment being called.
Can a fund call more than the commitment?
No. The uncalled commitment is the ceiling, and the notice states it so the investor can see it falling. Some agreements let the fund recall distributed capital, which raises the uncalled figure again; the notice should say so when it applies.
How is a capital call different from a distribution?
A call is money into the fund from investors against their commitments. A distribution is money out of the fund to investors from what it has realised. The record holds both against each investor, and the quarterly figures are computed from the two together.