Capital Call

The mechanics are set by the fund's limited partnership agreement (LPA) or equivalent constitutional document. It defines each investor's commitment, the commitment period during which the fund may call capital for new investments, the notice period the general partner must give, and the consequences of a missed payment, which, depending on the agreement, can include interest, loss of voting rights or forfeiture of part of the investor's interest. The amount still to be called is the investor's unfunded commitment; the total paid in to date is its contributions.

The Institutional Limited Partners Association (ILPA) publishes a standard capital call and distribution notice template, published in 2011 (version 1.1, October 2011) and updated in 2025. ILPA describes the notice as the general partner's announcement of a required transfer of capital between itself and its limited partners, and the basis on which an investor carries out its initial monitoring and fiduciary reporting duties. Its guidelines recommend that every notice show, for the investor and for the fund as a whole, the unfunded commitment and the cumulative contributions and distributions both before and after the call, together with itemised detail of the investments being funded, management fee calculations and offsets, clear references to the relevant sections of the LPA, and detailed payment instructions.

A capital call is also an anti-money laundering event. Money arrives at the fund or its administrator, so the receiving side will usually check that:

• the payment comes from an account in the name of the investor of record, and not from an unrelated third party;
• the amount and timing match the notice, with any over-payment, split payment or payment from a new account explained;
• the investor's due diligence file is current, including sanctions and PEP screening of the investor and its beneficial owners, before the money is accepted and the interest is issued.

Regulatory monitoring duties point the same way. In Singapore, for example, MAS Notice SFA04-N02 (dated 30 June 2025) requires a fund manager to scrutinise transactions throughout the relationship so that they are consistent with its knowledge of the customer, its business and risk profile and, where appropriate, the source of funds (paragraph 6.20), to pay special attention to complex, unusually large or unusual transactions with no apparent economic or lawful purpose (6.21), and to re-screen investors periodically and when MAS lists change or the investor's authorised signatories, connected parties or beneficial owners change (6.40(c) and (d)). See our guide to the MAS Notice SFA04-N02 requirements for fund managers.

Capital calls are distinct from distributions, which move money the other way, from the fund to its investors, and from the initial subscription, which creates the commitment in the first place. Many funds also use a subscription line or capital call facility, a short-term bank loan secured on investors' unfunded commitments, to fund investments before the called capital arrives.

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