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These terms are explained from a general financial point of view, but also with a more particular relationship to the private equity fund industry.

Capital Call / Drawdown

A Capital Call or a Drawdown is issued as a written notice to investors, requiring them to pay into the fund a portion of their Commitment. The Limited Partnership Agreement will state a minimum number of days notice period, normally 10 days.

Capital Proceeds

The amount of money received from a capital gain event, as opposed to interest on a loan or return of loan principal. With reference to a fund, Capital Proceeds is typically money received following the sale of shares in a Portfolio Company. A portfolio company may also distribute dividends which, depending on the nationality of the Beneficial Owners, may be subject to Withholding Tax.

Distribution / Distribution Notice

The fund will return money to its investors (Limited Partners and General Partner), in accordance with the Waterfall regulation of the Limited Partnership Agreement. A Distribution is preceded by a Distribution Notice which may give some background to the Distribution but also typically categorizes the money returned in relation to the Waterfall mechanism of the fund (return of Outstanding Capital, Outstanding Preferred Capital, interest, Capital Proceeds).

Distributions in specie / in-kind / in-natura

Distributions In Specie are distributions from the fund which are not in the form of cash. It will often be a distribution of shares in an underlying Portfolio Company. As any other distribution, a Distribution in Specie must also be made proportionally to all limited partners.


Distributions of listed or otherwise liquid shares would normally not cause difficulty for the investors who may themselves decide when to sell the shares. Often however, the shares so distributed are not easy to realise and in general Distributions in Specie are not popular among investors.


There are a number of clauses and Side Letter issues related to such distributions. The GP may have to consult the Investor Committee (IC) before making such distributions, and the IC may even be able to influence the valuation of such a distribution. That in turn will impact on the performance figures and Carried Interest calculation.


Some investors may refuse to accept Distributions in Specie and request a Side Letter stating that the GP upon such occurrence must realise the asset on their behalf and distribute cash. This may or may not have an effect of the valuation of the distribution.


Distributing assets in specie may be necessary in order to terminate the fund on time. It may also be in the investors’ interest when an early sale would imply dumping the share at a low price.

Escrow Account

Escrow generally refers to money held by a third party, normally in a bank, on behalf of transacting parties. The funds are held by the escrow service provider until it receives the agreed instruction to release the funds. In the case of a legal dispute, the final instruction may be in the form of a court order.


An escrow account may last for a limited period of time, the funds held following an agreed date to be distributed in accordance with initial agreement.


The LPA for some funds provide for early compensation to the GP of carried interest. The terms may include that part of such amounts are to be held in escrow accounts for a period of time or until certain conditions are met (see Claw Back).

Recallable Distributions

Recallable distributions to the investors in a fund are distributions which in accordance with the Limited Partnership Agreement may be subject for a second Capital Call. In other words, such distributions increase the amount of Remaining Commitment. Why recallable distributions – a couple of examples:


Example 1 – Excess capital called – The General Partner (GP) may have called capital for a transaction which for some reason did not happen. The GP wish to return the capital to the limited partners, but as the money was never put to use within the investment strategy of the fund, the distribution will be recallable. In other words, the GP gets another chance to investing the money.


Example 2 – Early exit – The GP makes an investment which for some reason is realised very quickly. The GP will normally have secured the right to recall such almost immediate returns, however, the capital element only, not the potential profit element of the distribution.


Other examples may be money tied to bridge investments, guarantees, warranties or underwriting of investments.