A recallable distribution pays the investor and restores its obligation to fund by the same amount, so call capacity, DPI and the capital account all move.
Unfunded commitment is the commitment, less everything contributed, plus every distribution the LPA designates as recallable and that can still be recalled. An illustrative investor with 20,000,000 committed, 15,000,000 called and 1,500,000 of recallable distributions has 6,500,000 unfunded, not 5,000,000: the fund can still call 30.0 per cent more than a calls-only view shows.
Worked in full in The Private Markets COO by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Recallable distributions are the part of a fund's distributions that the general partner may call again. Most limited partnership agreements allow it for a few categories: capital returned from an investment sold or refinanced soon after it was made, capital called for a deal that did not complete or was over-called, and sometimes amounts equal to fees and expenses so that more of the commitment can be invested. The investor receives the cash, but its obligation to fund is restored by the same amount. For a COO, the consequence is practical: capital call capacity, the investor's reported unfunded commitment and, often, the borrowing base of the subscription line all depend on getting this number right.
| Item | Amount |
|---|---|
| Commitment | 20,000,000 |
| Called for investments | 12,800,000 |
| Called for management fees and fund expenses | 2,200,000 |
| Total contributions | 15,000,000 |
| Distribution from a deal refinanced within the recall window, designated recallable | 1,200,000 |
| Excess capital returned after a closing came in under budget, designated recallable | 300,000 |
| Other distributions, not recallable | 7,500,000 |
| Total distributions | 9,000,000 |
| LPA cap on recallable amounts, % of commitment | 20% |
Unfunded commitment = commitment − contributions + recallable distributions still within the window and the cap
= 20,000,000 − 15,000,000 + 1,500,000 = 6,500,000
In Excel, with distributions in a table that carries a type and an expiry date: =B1-SUM(Contrib[Amount])+MIN(SUMIFS(Dist[Amount],Dist[Recallable],"Yes",Dist[Expiry],">="&TODAY()),B1*B2), where B1 is the commitment and B2 the cap. Recalls already made sit in contributions, so they reduce the result automatically.
Check the cap before anything else. Twenty per cent of 20,000,000 is 4,000,000; the investor has 1,500,000 designated, so 2,500,000 of room remains. A designation above the cap restores the commitment only up to the cap, and the excess is an ordinary distribution.
The investor's unfunded commitment is 6,500,000, or 32.5 per cent of the commitment instead of the 25.0 per cent its own records would show if they netted calls against the commitment alone. Over the life of the fund it can be asked for up to 21,500,000, 107.5 per cent of what it committed. That is the clause investors most often miss in their own liquidity planning; how a fund ends up calling more than the commitment in total is worked in can a fund call more than my commitment, and how much of the unfunded figure is free for new deals in how to calculate dry powder.
| Event | Contributions | Recallable still open | Unfunded |
|---|---|---|---|
| Today | 15,000,000 | 1,500,000 | 6,500,000 |
| The GP recalls 1,000,000 for a new investment | 16,000,000 | 500,000 | 5,500,000 |
| The recall window on the last 500,000 lapses | 16,000,000 | 0 | 5,000,000 |
The recall is a contribution like any other, so it raises paid-in capital and lowers DPI: 9,000,000 distributed over 15,000,000 paid in is 0.60x, and 0.56x once the 1,000,000 is recalled, although no value has been lost. Investors reading a quarterly report should know that a falling DPI can be a recall rather than a write-down. The lapse changes nothing in cash and still removes 500,000 of call capacity, which is why the expiry date belongs in the capital account system, not in a side spreadsheet.
At fund level the same arithmetic gives 130,000,000 of unfunded commitments against 100,000,000 on a calls-only view: 30,000,000 of capacity the GP may plan with. Whether a subscription line lender counts it is a separate question, answered only by the facility agreement's definition of uncalled capital.
| Designated recallable | Cap 10% (2.0) | Cap 20% (4.0) | Cap 25% (5.0) |
|---|---|---|---|
| 1.5 | 6.5 | 6.5 | 6.5 |
| 3.0 | 7.0 | 8.0 | 8.0 |
| 5.0 | 7.0 | 9.0 | 10.0 |
Below the cap, every euro designated restores a euro of commitment. Above it, nothing more is restored, and a distribution notice that labels 5.0 million as recallable under a 10 per cent cap overstates call capacity by 3.0 million. The distribution should be classified before it is calculated: which category it falls in, whether the window and the cap allow it, and what the notice to investors says.
Unfunded commitment = commitment − contributions + recallable distributions still open and within the cap: 6,500,000 here, not 5,000,000. Track the category, the window and the cap of every recallable distribution, and show them on the capital account. The investor's side of the same account is worked in how to reconcile a private fund capital account, and the free workbooks for this case include a distribution computed with and without an amount designated recallable.
Usually yes: the LPA caps recallable amounts, often as a percentage of commitment. Under a 20 per cent cap on a 20,000,000 commitment, up to 4,000,000 can restore the commitment; the illustrative investor has 1,500,000 designated, leaving 2,500,000 of room. Under a 10 per cent cap, labelling 5.0 million as recallable restores only 2.0 million and overstates call capacity by 3.0 million.
Yes, because the recall is a contribution and raises paid-in capital while past distributions stay the same. In the illustrative account, 9,000,000 distributed over 15,000,000 paid in is a DPI of 0.60x; after a 1,000,000 recall it is 0.56x, although no value has been lost.
The amount stops counting as unfunded commitment and becomes an ordinary, final distribution. Nothing moves in cash, but capacity falls: when the last 500,000 of recallable distributions lapses in the illustrative case, unfunded commitment drops from 5,500,000 to 5,000,000.
This article is one calculation from The Private Markets COO. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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