A drawdown is the process by which a general partner converts LP commitments into funded capital by issuing a capital call. When an LP commits $10 million to a fund, that capital is not transferred upfront — instead, the GP draws it down over time as investment opportunities arise. A typical private equity fund draws down 60–80% of commitments during the investment period (usually the first 3–5 years), with the remainder reserved for follow-on investments, fees, and expenses.
Drawdown Mechanics
Drawdown notice: The GP issues a formal notice specifying the amount, purpose, and payment deadline. Pro-rata calculation: Each LP's share is calculated based on their commitment percentage. Payment: LPs transfer funds within the notice period (typically 10–15 business days). Reconciliation: The fund administrator matches incoming payments to the capital call and updates each LP's capital account.
Drawdown in SPV vs Fund Structures
Fund drawdowns happen over multiple years across many investments. SPV drawdowns are typically a single event — investors fund the deal at closing, and there are no subsequent capital calls unless the SPV terms provide for reserves or follow-on capital. This single-drawdown simplicity is one reason SPV structures have lower administrative overhead per vehicle.