Recycling lets a venture fund reinvest early exit proceeds or management-fee offsets instead of distributing them, effectively investing more than 100% of committed capital. This boosts the share of capital actually working in deals (net invested capital).
The limited partnership agreement sets the recycling limit and time window. Done well, recycling improves net returns; pushed too far, it extends the period LP capital is at risk and can complicate distributions, so the cap and timing are negotiated carefully.
Related practice areaInvestment Management →