Called Capital
Definition
The cumulative amount of committed capital that a general partner has drawn down from limited partners through capital calls to fund investments, management fees, and fund expenses. Called capital represents the actual cash invested by LPs and is used to calculate performance metrics including DPI and TVPI. The pace of capital calls relative to total commitments indicates how actively a fund is deploying capital.
Complementary Terms
Concepts that frequently appear alongside Called Capital in practice.
A formal demand made by a private equity or venture capital fund's general partner requiring limited partners to transfer a portion of their committed capital to fund investments, management fees, or fund expenses. Capital calls are issued as investment opportunities arise rather than collecting all committed capital upfront, and the pace of capital calls relative to distributions is a key measure of fund performance.
The total amount of money that limited partners have pledged to invest in a fund over its lifetime. Not all committed capital is drawn down immediately; general partners issue capital calls as investment opportunities arise.
The ratio of total value returned (realised plus unrealised) to total capital invested. A MOIC of 3.0x means the investment has generated three times the original capital.
The amount by which a company's net working capital exceeds the level required to sustain its normal business operations. In M&A transactions, excess working capital increases enterprise value (and therefore equity value) because it represents surplus cash or near-cash resources available to the buyer beyond what is needed to run the business.
A measure of how effectively a company allocates capital to generate returns, calculated as net operating profit after tax divided by invested capital. ROIC above the cost of capital indicates value creation; below it signals value destruction.
The difference between current assets and current liabilities, representing the short-term liquidity available to fund day-to-day operations. Effective working capital management ensures a business can meet its obligations while optimising cash flow for growth investment.
A target level of net working capital agreed between buyer and seller in an acquisition, used as the basis for post-closing purchase price adjustments. The working capital peg ensures the buyer receives a business with a normalised level of operating liquidity, with adjustments made if actual working capital at closing is above or below the agreed amount.
An adjustment applied to the standard WACC to reflect the additional risk associated with specific intangible assets or early-stage businesses. Intangible-heavy investments typically warrant a higher discount rate than the firm-level WACC because their cash flows are less certain and more sensitive to competitive and technological disruption.
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