Commitment
Fundamental Concepts
In Short
A capital Commitment is a legally binding pledge from an investor to provide a certain amount of capital to a fund. This money is not paid upfront but is drawn down by the manager through "capital calls" as needed over the fund's investment period.
detailed Definition
A Capital Commitment—also referred to simply as a commitment or committed capital—is the legally binding pledge made by an investor to contribute a specified amount of capital to a private equity or venture capital fund.
This capital is not paid upfront. Instead, it is drawn down by the fund manager over time through what are known as capital calls or drawdowns. These typically occur during the investment period, which often spans the first three to four years of the fund’s lifecycle, though drawdowns can occur across a longer timeframe depending on the fund’s structure.
The total lifecycle of a private equity or venture capital fund generally ranges from eight to ten years, starting from the fund’s first close, during which the manager can continue accepting commitments from new investors for a limited period.
Important Information
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