When you commit to a private fund you do not hand over the money at once. You promise it. The GP then calls that capital in pieces, as it finds deals to put it to work, and returns it in pieces, as those deals resolve. Understanding this rhythm, capital in, capital out, over roughly a decade, is the foundation for everything else in fund mechanics.
This is the single biggest difference between a private fund and a public one. A mutual fund is invested the moment you buy it. A private fund builds its exposure slowly, on the GP's schedule, not yours, which is exactly why pacing a program takes real planning.
Commitment versus called capital
Your commitment is the total you have promised. Called capital is what has actually been drawn so far. Early in a fund's life, only a fraction of the commitment is called, so your real exposure is far below the number on the subscription document. Over the investment period, usually the first five years, the GP draws the rest as deals appear.
Because capital is called on demand, an LP must keep the promised money available to send within days of a call notice, without letting it sit idle earning nothing in the meantime. Managing that tension, ready but not idle, across many funds at once is a core operational discipline.
The lifecycle
A typical fund runs ten years plus extensions. The first half is the investment period: capital is called and deployed into new deals. The back half is the harvest: managing, improving and exiting positions, with distributions flowing back to LPs as deals resolve. Toward the end, the GP works to wind down remaining holdings and return the last of the capital.
Each phase feels different to an LP. The early years are all outflows and little to show. The middle years are quiet, holdings maturing out of sight. The later years bring the distributions that finally reveal whether the fund worked. Patience is not optional, it is structural.
Net cash flow and the drag of the early years
For the first few years, an LP's cash flow to a single fund is negative: capital is going out to fund deals and pay fees, while little is coming back. Only later, as exits arrive, does the fund turn cash-flow positive and, eventually, return more than was put in. This early negative stretch is the cash-flow face of the J-curve, covered later in this track.
The way sophisticated allocators smooth this is to commit to a new fund every year, so that at any moment some funds are calling capital while others are distributing it. Done well, the outflows of young funds are partly funded by the distributions of older ones, and the whole program self-finances over time.