Capital call
A general partner's demand for part of the capital a limited partner committed, made as investments are found. The manager chooses the timing, so investors must hold liquidity ready to meet calls.
Where you will meet it
Capital call appears in 8 learning outcomes on the CFA syllabus. A few of them:
- Explain the tools available to manage liquidity risk in a portfolio
“For an institution holding illiquid assets, liquidity risk is the chance of being unable to meet spending, capital calls or rebalancing without selling at a loss.”
- Weigh the return potential and risks of private versus public market exposure within a long-term strategic allocation
“The costs are illiquidity, uncertain timing of capital calls and distributions, leverage, concentration and valuation lag.”
- Propose liquidity arrangements suited to goal-based and comprehensive financial plans
“Identify liquidity needs first: spending, an emergency reserve, near-term goals, taxes, private-fund capital calls and gifts.”
- Discuss what investors should assess when allocating to each kind of alternative investment
“Consider liquidity: lock-ups and capital calls in private funds versus monthly or quarterly dealing, which can be gated, in many hedge funds.”
See also
General partner · Limited partner · Liquidity
Practise it
Practise capital call until it is automatic: questions that explain every wrong option.
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