A limited partner commitment is the binding promise an investor makes, on joining a private equity or other closed-ended private fund, to contribute up to a stated amount of capital. The money is not paid at the outset. The fund's manager draws it down as investments are made and expenses fall due, by issuing a capital call notice for each capital call. The portion not yet drawn is the unfunded commitment.
The commitment is set out in the investor's subscription agreement and the fund's partnership agreement. It determines the investor's share of the fund, and during the investment period the management fee is normally charged on committed capital. An investor that fails to pay a call faces severe penalties, which can include forfeiture of part of its interest. A commitment can be transferred, with the manager's consent, through a secondary fund transaction. The manager's own contribution is the general partner commitment.