Capital Call

A capital call refers to a request made by a company or investment fund to its investors to contribute additional funds or capital to fulfill their financial obligations or investment commitments. Capital calls are commonly used in various types of investment vehicles such as private equity funds, venture capital funds, real estate partnerships, and hedge funds.

What is to be included with a capital call:

1. Investment Commitments: When investors initially decide to invest in a fund or partnership, they commit to providing a certain amount of capital over a specified period. This commitment is outlined in legal agreements and investment documents.

2. Capital Needs: As the fund or partnership identifies investment opportunities or requires additional capital for operational purposes, it may need to call on the investors to fulfill their commitments. Reasons for a capital call can vary, including making new investments, covering operational expenses, or addressing unexpected cash flow needs.

3. Notice to Investors: The fund manager or general partner sends a formal notice to the investors, known as a capital call notice or capital call letter. This notice outlines the details of the capital call, including the amount to be contributed by each investor, the deadline for the payment, and any specific instructions for submitting the funds.

4. Contribution Deadline: Investors are typically given a specific timeframe, often ranging from a few weeks to a couple of months, to fulfill their capital call obligations. It's important for investors to meet the deadline to ensure the smooth functioning and financial health of the fund or partnership.

5. Payment and Documentation: Investors are responsible for making the requested capital contribution within the specified timeframe. They typically transfer the funds to a designated account or entity as instructed in the capital call notice. Along with the payment, investors may be required to complete relevant documentation or forms to acknowledge their compliance with the capital call.

It's important to note that capital calls are typically made to investors who have committed capital but have not yet fully paid their obligations. The purpose of capital calls is to ensure that the fund or partnership has access to the necessary capital when needed, allowing for timely and effective deployment of funds and investment activities.

Investors should carefully review the terms and conditions of their investment commitments and seek professional advice to understand their obligations and the potential risks associated with participating in capital calls.