What are LP commitments?
LP commitments (Limited Partner commitments) are the legally binding capital pledges that institutional investors (pension funds, sovereign wealth, endowments, family offices) make to a venture capital or private equity fund at the fund’s closing. Total committed capital determines fund size (e.g., a “$200M fund” means $200M in LP commitments). Critically, the full commitment is not deployed at closing — it is called over the fund’s 3-5 year investment period via capital calls (drawdowns) issued by the GP as deals are funded and management fees become due.
Commitment vs. drawdown mechanics
- Committed capital: total pledged amount; subject to subscription agreement.
- Called capital (paid-in / drawn): portion actually transferred from LPs to fund.
- Uncalled capital (dry powder at LP): commitment not yet drawn; LP must maintain liquidity.
- Drawdown notice: GP issues capital call (typically 10-15 business days notice) for investments and fund expenses.
- Default: LP failure to fund a call triggers severe contractual penalties (interest, forfeiture of prior commitments, dilution).
Lifecycle and capital deployment
- Year 1-3: peak investment period; 70-80% of capital called for new investments.
- Year 4-5: follow-on rounds in portfolio companies; reserve deployment.
- Year 5-10: harvest period; distributions to LPs as exits occur.
- Recyclable capital: some funds allow recycling early distributions back into new investments (extends investable capital).
LPA terms governing commitments
- Subsequent closings: LPAs typically allow follow-on LP commitments within 6-12 months of first close; later LPs may pay catch-up interest.
- Excuse rights: regulated LPs (insurance, pension) may have right to opt out of specific investments (e.g., gaming, alcohol, sanctions exposure).
- Transfer restrictions: LP commitments generally not freely transferable; secondary market exists with GP consent.
Türk LP ekosistemi
Türk girişim sermayesi fonlarına LP olarak katılan kuruluşlar: Türkiye Wealth Fund’ı (TVF), özel emeklilik şirketleri, banka iştirakleri (İş Yatırım, Akbank Girişim), aile ofisleri ve yabancı LP’ler (EBRD, IFC, EIF). Türk Girişim Sermayesi Yatırım Ortaklığı (GSYO) yapısı SPK düzenlemesine tabi olup vergisel avantajlar sunar (kurumlar vergisi istisnası, gelir vergisi avantajları). Türk fonlar tipik olarak USD-denomine commitment alır (TL volatilite koruma için).
Do: match LP liquidity profile to drawdown schedule expectations; review LPA excuse and transfer terms carefully; maintain readiness for capital calls.
Don’t: over-commit beyond available liquidity — drawdown default penalties are severe and reputational damage among GPs persists.