What is the right capital call structure for your fund?

27th February 2026

The timing of capital contributions from investors affects many aspects of a fund’s performance. It influences liquidity, governance, investor outcomes, and the manager’s ability to execute the investment strategy as intended.

From an investor experience perspective, clarity on when capital will be called, how long it will remain deployed, and how distributions will be timed is as important as the target return itself.

There are three primary approaches. Each has its place; each serves different investment classes and different deployment strategies.

UP FRONT CAPITAL, ON APPLICATION

Investors pay the full amount of their investment capital at the time they subscribe.

Advantages	Simple to administer. Capital is immediately available for the manager to execute the investment strategy. Appropriate where capital must be deployed quickly, or where the underlying assets are already identified.
Disadvantages	Cash drag if capital cannot be deployed quickly. Investors carry idle cash exposure until assets are acquired.
Best suited to	Single asset acquisitions, liquid listed markets, and open-ended vehicles with continuous deployment.

PERIODIC OR STAGED CAPITAL CALLS

Capital is drawn in tranches, as amounts are needed towards the acquisition of specific assets. (For example, tranche one to pay a deposit, tranche two as a progress payment, tranche three to cover the balance at settlement).

Advantages	Better alignment between deployment and drawdowns. Reduces unnecessary cash holdings within the fund. Works well where a portfolio is built asset by asset.
Disadvantages	Operationally more complex and requires clear investor communication. Investors must retain liquidity to meet calls. Missed or late calls can create governance pressure, and cause transaction delays or forfeitures.
Best suited to	Property acquisition programs, construction projects, strategies with discrete investment events.

COMMITTED CAPITAL, WITH CALLS MADE AS OPPORTUNITIES ARISE

Investors commit a defined amount upfront. Capital is only called when required. Investors are obliged to fund capital calls as they are made, typically within a defined notice period.

Advantages	Maximum alignment between the investment opportunity and deployment. Supports multi-year programs where timing is uncertain. Standard practice for long-dated, illiquid, investment strategies.
Disadvantages	Investors carry a contingent obligation that must be managed within their broader liquidity and investment planning. Requires robust processes, documentation, and governance. Care is needed to avoid over commitment or investor fatigue, where frequent or unpredictable calls erode investor confidence and willingness to support future strategies.
Best suited to	Private equity, venture capital, private credit, infrastructure programs with uncertain investment pacing.

CHOOSING THE RIGHT METHOD

The best approach is the one that most closely reflects the commercial reality of the asset class and the expected pace of deployment. A structure that aligns capital flows with deployment needs will improve investor outcomes and reduce operational burdens. Above all, managers should ensure the funding mechanism is clearly explained, practical to administer, and allows the strategy to be implemented as designed.

Whichever model is adopted, consistent capital-call discipline and clear investor communication is essential.