Depending on liquidity management, product providers generally have three different options:
- One-time payment upon subscription (similar to closed-end AIFs)
- Regular contributions (similar to a savings plan for open-ended investment funds)
- Opportunity-based capital calls
While one-time and regular payments from the public capital market are already well known, the capital call is a specialty of the private capital market.
Capital calls occur only when investments in the predefined asset goals of the fund portfolio (private equity, private debt, real estate, infrastructure, etc.) need financing, that is when the opportunity for investments by the fund manager arises. In this process, the product providers or fund managers (usually called general partners) request investors to fulfill their committed capital, the so-called committed capital, given during the subscription period. This can happen in multiple tranches.
To accommodate these and several other peculiarities in the private capital market, an efficient and tailored technical infrastructure is necessary. Such infrastructure allows, for example, all capital commitments to be collected in one place, and the capital can then be addressed and collected in a standardised manner through the respective capital call. This enables funds with a capital call structure to be processed for the first time through straight-through processing (STP).