Commitments, Drawdowns and Capital Calls
An AIF investor usually signs up for a commitment and pays it in parts as the fund calls for money. This lesson explains commitments, capital calls, drawn-down and undrawn amounts, and why the notice period and the consequences of missing a call depend on the fund's placement memorandum.
A commitment, not a single payment
An investor in an AIF usually does not hand over the whole investment on day one. Instead the investor signs up for a commitment: the total amount the investor agrees to contribute to the fund.
The fund need not collect it all at once. The manager asks for money as it is needed.
Capital calls and the undrawn balance
Each request is a capital call, also called a drawdown notice. It asks the investor to pay a stated part of the commitment.
Two running totals follow from this. The amount paid so far is the drawn-down capital. The rest is the undrawn commitment. At any time: undrawn commitment = commitment − drawn-down capital.
The undrawn commitment is not optional money. It stays payable whenever the fund calls for it, under the terms of the fund's documents.
What SEBI leaves to the placement memorandum
SEBI does not fix the notice period for a capital call, and it does not fix a penalty amount for missing one. These are contractual terms, set out in the fund's placement memorandum, including the steps that may be taken against an investor who defaults. SEBI's framework does, however, attach some consequences to a default: for example, a defaulting investor is kept out of the fund's later investments until the default is made good, and bears the cost of any borrowing used to cover the shortfall.
Because they are contractual, they differ from fund to fund. An investor who commits to a fund is bound by that fund's terms, so the answer to 'how long do I get to pay?' or 'what happens if I am late?' is in the placement memorandum, not in a SEBI figure.
An obligation that runs for years
A commitment is therefore a funding obligation that can run for years. The investor has agreed to pay amounts whose timing is decided by the manager's calls, not by the investor.
This sits alongside the other risks of an AIF: units are illiquid, unlisted assets are hard to value, and capital can be lost. Paying a call does not reduce any of them.
Rules at a glance
A call arrives in the third year
Suresh, 57, committed to a Category II AIF and has so far paid half of his commitment. In the fund's third year the manager issues a further capital call.
How many days Suresh has to pay is not a SEBI figure. It is whatever the fund's placement memorandum says, and the memorandum also sets out the steps the fund may take if he does not pay. By committing he accepted those terms. The balance still uncalled after this payment remains payable whenever the fund asks for it.
Tracking drawn and undrawn amounts
- Assumptions of this example: an investor commits ₹1.50 crore to an AIF. The fund makes three capital calls, for 30%, 20% and 10% of the commitment, and the investor pays each one.
- First call: 30% × ₹1.50 crore = ₹45 lakh. Drawn down: ₹45 lakh. Undrawn: ₹1.50 crore − ₹45 lakh = ₹1.05 crore.
- Second call: 20% × ₹1.50 crore = ₹30 lakh. Drawn down: ₹45 lakh + ₹30 lakh = ₹75 lakh. Undrawn: ₹1.50 crore − ₹75 lakh = ₹75 lakh.
- Third call: 10% × ₹1.50 crore = ₹15 lakh. Drawn down: ₹75 lakh + ₹15 lakh = ₹90 lakh. Undrawn: ₹1.50 crore − ₹90 lakh = ₹60 lakh.
Result. After three calls totalling 60% of the commitment, ₹90 lakh has been drawn down and ₹60 lakh remains undrawn. That ₹60 lakh stays payable whenever the fund calls for it.
Key points
- Commitment: the total amount an investor agrees to contribute to the fund.
- Capital call (drawdown notice): the manager's request for part of the commitment.
- Drawn-down capital is the amount paid so far; the undrawn commitment is the rest.
- The undrawn commitment stays payable whenever the fund calls for it.
- SEBI fixes no notice period and no penalty amount for capital calls; these are set in the placement memorandum, though SEBI's framework does attach some consequences to default.
Common misunderstandings
- A commitment is not the amount paid on day one: it is the total the investor has agreed to contribute, called for in parts.
- The undrawn commitment is not money the investor may choose to withhold: it remains payable when the fund calls for it.
- SEBI has not fixed a standard notice period or penalty amount for capital calls: both are set in each fund's placement memorandum, although SEBI's framework does attach some consequences to default.
- Paying capital calls on time does not reduce investment risk: the fund's illiquidity, valuation uncertainty and possible loss of capital remain.
Questions people ask
What is the difference between committed and drawn-down capital?
Committed capital is the total an investor has agreed to contribute. Drawn-down capital is the part actually paid so far in response to capital calls. The difference is the undrawn commitment.
Who decides when a capital call is made?
The fund's manager, who calls for part of the commitment as money is needed, under the terms of the fund's documents.
Where are the consequences of missing a call laid down?
In the fund's placement memorandum, as contractual terms that differ from fund to fund. SEBI fixes no notice period and no penalty amount, though its framework attaches some consequences to default, such as keeping a defaulting investor out of later investments until the default is made good.
What this lesson relies on
- SEBI (Alternative Investment Funds) Regulations, 2012 (as amended to 14 July 2026)
- SEBI Master Circular for Alternative Investment Funds, 3 June 2026 (as updated)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.