Recycling

A fund's ability to reinvest returned capital rather than distributing it, usually capped at a stated percentage of commitments.

Example

A fund permitted to invest up to 120% of commitments by reinvesting early proceeds.

Important

It puts more capital to work but delays distributions and can increase total fees paid over the fund's life.

Related terms

  • Committed capital — The total amount an investor has contractually agreed to provide to a fund, whether or not it has yet been called.
  • Management fee — A recurring charge for running an investment, usually quoted as a percentage of the assets held and taken every year regardless of the result.

Lessons that explain it

  • The clauses that decide what happens when something goes wrong — Beyond fees and carry, a fund's agreement governs who must stay, how capital can be reused, what happens if LPs lose confidence, and what you are entitled to know. (12 min)

All 578 terms in the Investing glossary