Investment period vs commitment period: what is the difference in a private equity fund?

Can the manager still invest, and can investors still be called? Two distinct periods that change your cash flows, fees and risk.

Introduction: two periods, two rights, one question: when can the fund invest, and when can it call your money?

An investor who signs a commitment to a private equity fund quickly meets two similar expressions: investment period and commitment period. They describe overlapping windows, and confusing them leads to concrete mistakes: believing that capital will no longer be called once the investment period ends, or thinking that a manager can invest for the whole life of the fund.

According to the ILPA Principles 3.0, the investment period runs from the initial closing of the fund to the end date set in the limited partnership agreement (LPA). The ILPA glossary describes it as the period during which capital can be called from investors to fund investments.

"Investment Period: the time from the initial closing of the fund to the end date as specified in the LPA, or the date of an early termination of the Investment Period, during which capital can be called from LPs to fund investments.", ILPA, Principles 3.0, glossary (unofficial translation by Hectelion).

This definition raises the central question of this article. Several developments make the distinction more important today. Institutional investors look more closely at fees after the investment period, managers sometimes extend their funds through term extensions, and early sales of fund interests, the secondaries, require knowing exactly where a fund stands in its cycle. This article distinguishes the two periods, shows how they fit together in an LPA, explains their effect on fees and capital calls, and then presents two worked examples, one in France and one in Switzerland. It ends with a FAQ of ten questions and the sources used.

Secure your reading of the commitment before you sign

Before committing capital to a fund, having the contractual timetable, the fees and the suspension clauses reviewed avoids surprises that can last several years. Hectelion offers a no-obligation thirty-minute discussion to examine your situation, through its booking calendar. Our team tells you what you can analyse yourself and what should be reviewed with your legal adviser.

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Definition: what do the investment period and the commitment period mean?

The investment period is the window during which the general partner (GP) can make new investments in companies, using capital called from investors. It governs the fund's deal flow: while it is open, the manager can sign new transactions. At its end, most agreements prohibit new investments in new companies, subject to the exceptions set out in the LPA.

The commitment period, or commitment period, is the window during which investors can be called to pay the part of their commitment not yet paid in. Each capital call, or drawdown, finances an investment, management fees or fund expenses. Committed but uncalled capital remains with the investor, who must be able to pay it quickly.

The two periods can coincide, but they are not legally identical. The first governs what the manager can buy. The second governs what the investor can be called to pay. An LPA may provide for calls after the investment period has ended, for fees, expenses or follow-on investments in companies already held, so each clause must be read separately.

In Switzerland, the most common form for a closed-end fund is the limited partnership for collective investment (SCmPC), governed by article 98 of the Collective Investment Schemes Act (CISA). At least one partner is unlimitedly liable, while limited partners are liable only up to a fixed amount, the commandite. This framework does not set the length of the periods: it is defined in the fund's documents, and limited partners must be qualified investors within the meaning of article 10 paragraph 3 or 3^ter of the same act.

Origin: from contractual periods to reporting standards

Investment and commitment periods have always been negotiated terms between managers and investors. Their form became standardised as institutional private equity grew and funds began to be assessed on comparable indicators. The ILPA principles published in 2019, in their version 3.0, set precise recommendations: the length of the investment period should be clearly defined in the fund documents, so that ambiguous wording does not extend the period and generate excessive fees.

In January 2025, ILPA published an updated reporting and performance template intended for market adoption. The ILPA announcement of January 2025 presents this template, which aims to make the statements sent to investors more comparable.

Why distinguish these two periods rather than confuse them

First, the distinction determines your liquidity needs. An investor who reasons only from the investment period may underestimate the calls possible after that date, and find itself short of cash when a fee call or a follow-on investment arrives.

Second, it drives the fee calculation. The ILPA principles provide that, during the investment period, fees may be calculated on commitments, and that they decline after it ends. A confused reading of these dates misstates the real cost of the fund.

Third, it structures the valuation of holdings. An investor selling its position on the secondary market must know how much capital has already been called, how much remains to be called and where the fund stands in its investment period.

Fourth, it highlights suspension clauses. Certain events can interrupt the investment period before its scheduled end, with consequences for the manager's decisions.

Fifth, it avoids misreading performance multiples. A young fund still in its investment phase does not have the same DPI as a fund in its divestment phase. Multiples must be placed in this cycle, as the comparative article on DPI, RVPI, TVPI and MOIC explains.

How do the two periods fit together in an LPA?

An LPA is read in sequence, in six steps.

Step one: the investor signs its commitment, which sets the maximum amount it can be called to pay.
Step two: during the commitment period, the manager calls capital as needs arise.
Step three: during the investment period, the manager selects and finances new companies.
Step four: after the investment period, the fund manages its portfolio and may finance follow-on investments in companies it already holds, as the LPA allows.
Step five: the divestment phase begins, and sale proceeds are distributed or, if the LPA allows, recycled.
Step six: the fund's life ends, sometimes after extensions approved by investors.

The fund's J-curve illustrates the same chronology: capital calls come before distributions, and the fund's position on its curve depends on when its investment period ends.

Worked example (illustrative). A fund with CHF 10,000,000 of commitments, a five-year investment period and fees of 2% a year on commitments during that period. At the end of year five, CHF 6,000,000 is invested at cost and unrealised. If the LPA then sets fees at 1.75% on this unrealised capital, annual fees fall from CHF 200,000 to CHF 105,000.

Data point	During the investment period	After the investment period
Fee base	Commitments (CHF 10,000,000)	Unrealised capital (CHF 6,000,000)
Rate applied	2% a year	1.75% a year (assumption)
Annual fees	CHF 200,000	CHF 105,000

The 1.75% rate is an assumption of this calculation: it must be read in the actual LPA.

When these concepts matter in practice

The distinction becomes decisive in four situations. An investor subscribing to a fund near the end of its investment period must know whether calls remain possible to finance fees or follow-ons. A family office considering a re-commitment (re-up) with the same manager must compare the timetable of the new fund with that of the previous one. An investor wishing to sell its interest on the secondary market must know the share already paid in. Finally, the head of a company held by a fund must know when the manager can still finance an add-on acquisition, which may change the value of his company.

Question asked	Period to read	Point of attention
Can the manager still buy a company?	Investment period	Check the exceptions: reinvestment, follow-ons
Can I still be called to pay?	Commitment period	Check calls for fees and expenses after the investment period
How much will I pay in fees this year?	Both, with the date of the fee base change	Switch from commitments to unrealised capital
Can the fund be interrupted?	Suspension clauses	Trigger events and reinstatement vote
Can my interest be sold?	Both, with the capital already called	Amount still to be called and stage of the fund

Whom to consult to read these periods in a fund?

Three criteria guide the choice of adviser.

The nature of the commitment: a large amount, a planned sale or a re-commitment justifies a full reading of the LPA.
The complexity of the clauses: extensions, suspensions, reinvestments and subscription lines change the real timetable.
The need to quantify: a projection of fees and calls requires a model, not only a legal reading.

Hectelion works on business valuation and financial instrument valuation, as well as financial structuring. When a fund interest must be valued or when an investment decision depends on its timetable, our team can prepare a quantified analysis, in addition to the investor's legal advice. Hectelion is not authorised by FINMA and does not work on listed transactions. A manager preparing its own fundraising can be supported on its fundraising process, whose cost is detailed in our article on how much fundraising advisory costs.

Advantages: predictability, call management, fee transparency

The distinction first provides predictability: an investor knows the dates on which it can be called and the dates on which the manager can invest. It then supports call management: available cash can be reserved for the remaining committed amount, without tying up liquidity unnecessarily. Finally, it encourages a reading of fees faithful to the contract, since the change of fee base after the investment period becomes visible in the model.

For a manager, the same clarity strengthens the confidence of institutional investors, who expect precise rules on dates, fees and suspensions.

Limits: extensions, suspensions and clauses that change the dates

These concepts are not sufficient on their own. The dates are contractual boundaries, not performance guarantees: a fund whose investment period has ended may still hold companies with low valuations. Term extensions, approved under the rules of the LPA, change the initial timetable. Suspensions triggered by an event can stop investments before the planned date. Finally, the reading says nothing about the quality of the investments made, which requires a separate analysis of the portfolio.

The five mistakes to avoid

Mistake 1: confusing the end of the investment period with the end of the fund

A closed investment period does not mean the fund is closed. The manager continues to manage, sell and distribute capital for several more years. Reading the fund's life as an investment period leads to misjudging available cash flows.

Mistake 2: believing calls stop with the investment period

Calls can continue after that date for fees, expenses or follow-on investments, depending on the LPA. An investor who has not reserved cash for these calls exposes itself to a payment default, with severe contractual consequences.

Mistake 3: ignoring the change of fee base

The ILPA principles recommend that fees decline at the end of the investment period and that their base moves to a percentage of the cost of unrealised capital. An investor who models constant fees on commitments overstates its real cost over the second part of the fund's life.

Mistake 4: underestimating the effect of a suspension

A suspension of the investment period changes the manager's ability to carry out new transactions. The ILPA principles provide that certain events, such as a key person event, can trigger it automatically, subject to an investor vote to reinstate it. The investor must know these triggers before committing.

Mistake 5: leaving an ambiguous wording on the dates

A clause that ends the investment period by reference to a vague event can extend both the period and the fees. The ILPA principles recommend defining the length of this period clearly in the fund documents. An investor should require this precision before signing.

Case 1: a French family shareholder facing a capital call six years after its commitment

A French family shareholder subscribed in 2019 to a commitment of EUR 2,000,000 in a private equity fund. It paid EUR 1,300,000 over the first five years, corresponding to investments and fees. In 2025, six years after its commitment, it receives a call of EUR 120,000 to finance a follow-on investment in a portfolio company and fund operating costs. It questions the legitimacy of this call, since the investment period has closed.

Reading the LPA shows that the commitment period is longer than the investment period, and that calls for follow-ons and fees remain possible within that window. The call is therefore compliant with the contract, but its amount must be provided for in the shareholder's cash planning. The calculation covers the EUR 700,000 still to be called, whose schedule must be projected with the manager. This example is illustrative: each fund sets its own rules.

Case 2: a Swiss family office and the fee calculation after the investment period

A Swiss family office holds a commitment of CHF 10,000,000 in a SCmPC. Six years after the initial closing, CHF 6,000,000 is invested at cost and unrealised. During the investment period, fees are 2% a year on commitments, that is CHF 200,000 a year. The LPA then sets fees of 1.75% on unrealised capital, that is CHF 105,000 a year.

The family office compares this cost with that of a competing fund whose fees remain calculated on commitments for its whole life. The annual gap is CHF 95,000 during the divestment phase, which it includes in its expected net return. This case is illustrative: the 1.75% rate and the invested amount are assumptions, to be replaced by the data of the actual LPA and of the investor's statements.

A word from the founder

"An investor who reads only the end date of the investment period is reading half the contract. The commitment period, the fees and the suspension clauses decide what it actually pays, and when.", Aristide Ruot, founder of Hectelion SA.

"In our mandates, the first question is never the expected return. It is when the capital will be called, and how much cash must be set aside to meet it.", Aristide Ruot, founder of Hectelion SA.

FAQ: the 10 essential questions on the investment period and the commitment period

Introduction: what to remember before the questions

The questions below cover the points that come up most often among investors reviewing a private equity fund. The answers refer to the general framework: the LPA of each fund remains the reference.

Q1: Are the investment period and the commitment period always identical?

No. In practice they often coincide, but the LPA can separate them. The commitment period can be longer than the investment period, in particular to finance fees or follow-on investments. Both clauses must therefore be read separately.

Q2: What happens after the investment period ends?

In principle the manager can no longer acquire new companies, except for exceptions set out in the LPA. It manages the portfolio, completes sales and distributes proceeds. The fund continues to exist until the end of its term.

Q3: Can a manager invest after its investment period has ended?

Only if the LPA allows it. The most common exceptions concern follow-on investments in companies already held and, depending on the contract, the reinvestment of certain sale proceeds. An investment outside these cases generally requires investor approval.

Q4: Do management fees change at the end of the investment period?

Yes, in most funds. The ILPA principles recommend a reduction of fees at the end of the investment period, with a base that moves to a percentage of the cost of unrealised capital. The exact rate and base are negotiated and set in the LPA.

Q5: What is a suspension of the investment period?

It is the temporary interruption of the manager's ability to invest, triggered by an event defined in the LPA, for example the absence of key persons. The ILPA principles provide that the suspension becomes permanent within a defined period, unless investors vote to reinstate it.

Q6: Is the length of the investment period set by law?

No. In Switzerland, the SCmPC defined in article 98 of the Collective Investment Schemes Act governs the form of the company, but the length of the periods is set in the fund's documents. The same applies in France, where the length is negotiated between the manager and investors.

Q7: What is a follow-on investment?

It is an additional investment in a company already held by the fund, to finance its growth, an acquisition or its liquidity needs. Depending on the LPA, it can be financed after the investment period, which makes calls possible in that window.

Q8: Is a commitment paid as soon as it is signed?

No. The commitment is the maximum amount the investor can be called to pay. It is called gradually, as investments and fees arise. Uncalled capital remains with the investor, which must therefore plan its cash.

Q9: How can the dates of an existing fund be checked?

Read the LPA, in particular the definitions of the investment period, the extension and suspension clauses, and the fee rules after that period. The manager's quarterly statements then make it possible to verify the calls made and the amounts still to be called.

Q10: Are these periods enough to judge a fund's performance?

No. They provide the framework within which performance is measured, but they say nothing about the quality of the investments or the level of return. That judgement rests on multiples such as DPI, RVPI, TVPI and MOIC, read together with IRR, as the comparative article on these multiples shows.

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Conclusion: the investment period governs what the manager can buy, the commitment period what you can be called to pay

The two periods answer two distinct questions. The first concerns the manager and the portfolio: when it can buy, and how far it can go. The second concerns the investor and its cash: when it can be called, and how much it must keep available. Confusing them amounts to reading a contract with a single date, when it contains several.

Before signing, three checks are necessary. The first is to note in the LPA the exact dates of the investment period, the commitment period and any extensions, together with the definition used for each. The second is to reconstruct the calendar of possible calls, including those that may arise for fees or follow-on investments after the investment period has ended. The third is to project the fees, taking into account the change of fee base set by the contract, and then to compare this cost with the expected net return.

These checks are more useful before commitment than during the life of the fund, because the clauses negotiated at the outset set the room for manoeuvre later. For an investor, the question is therefore not only whether the manager performs well. It is also when its capital will be called, under what conditions the investment period can be suspended, and how much cash to keep in reserve to meet those calls. Hectelion can structure this analysis and turn it into a quantified payment schedule, alongside the legal review needed to read the LPA.

Summary of the article

The investment period defines the window during which the manager can acquire new companies. The commitment period defines the window during which the investor can be called to pay its commitment. The two can coincide, but the LPA can separate them, in particular for fees or follow-on investments.

The ILPA Principles 3.0 recommend a clear definition of the length of the investment period and a reduction of fees after it ends, with a base moving to the cost of unrealised capital. Suspension clauses can interrupt investments before their scheduled end.

In Switzerland, the SCmPC under article 98 of the Collective Investment Schemes Act governs the form of the fund, without setting the length of the periods. Each LPA must be read to establish its dates, its fees and its triggers.