Capital account
A capital account is the running balance of a single partner's economic interest in a fund: contributions in, allocations of income, gains and losses, less distributions out. Every LP has one and the sum of all of them is the fund's partners' capital.
Example
An LP commits $5M to a $50M fund. After two capital calls totalling 30% of commitments, their contributions are $1.5M. The fund marks up a position and allocates the LP $200,000 of unrealised gain. Their capital account is $1.7M. A distribution of $300,000 takes it to $1.4M.
Confused with
Commitment. The commitment is the promise, $5M in the example. The capital account is what has actually happened so far. The gap between them is unfunded commitment.
NAV. The fund's NAV is the sum of all capital accounts, which is why a capital account that does not reconcile to the bank is an audit problem for the whole fund.
Related terms
- Capital call A capital call, also called a drawdown, is a notice from the general partner requiring each limited partner to wire a portion of their committed capital to the fund by a due date, usually ten business days, to fund investments, fees or expenses.
- Distribution waterfall A distribution waterfall is the sequence in which a fund's proceeds are allocated between limited partners and the general partner, typically return of contributed capital first, then a preferred return to LPs, then a catch-up to the GP, then the remaining profit split at the carried interest rate.
- DPI (distributions to paid-in capital) DPI, distributions to paid-in capital, is the total cash and stock distributed to limited partners divided by the total capital they have contributed.