Fund accounting

Equalisation

Also called equalization, subsequent closing adjustment, late-closer interest, catch-up contribution.

Definition

Equalisation is the adjustment made at each closing after the first that requires incoming limited partners to contribute their pro rata share of capital already called, plus an equalisation interest charge set in the LPA, with the proceeds paid or credited to the LPs who funded earlier, so that all LPs hold the same proportion of every investment regardless of when they joined.

Updated October 9, 2026Checked against our editorial standards

Example

A fund holds a first close on $40M and calls 25%, or $10M. Six months later a second close adds a $10M LP, taking the fund to $50M. The new LP must contribute its 20% share of the $10M already called, or $2M, plus equalisation interest at the LPA rate of 8% a year for six months, which is $80,000. The $2M is paid out to the first-close LPs, restoring their unfunded commitment, and the $80,000 goes to them as compensation for having funded early. Every LP now stands at 20% called.

Confused with

True-up. A true-up is any correction that brings a fee or allocation back to the agreed basis. Equalisation is the specific mechanism for late closers, with its own interest charge.

Recallable distribution. The money returned to first-close LPs at equalisation is a rebalancing of contributions, not a distribution of proceeds. It increases their unfunded commitment and does not count towards DPI.

In practice

The LPA sets the interest rate, whether interest goes to the early LPs or to the fund, and whether late closers also bear a share of management fee already paid. Interest received is taxable to the LPs who get it, so the notice should state it separately. A common error is to equalise the investment contributions correctly but forget the fee and expense drawdowns.

Related terms

Capital callA 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.
True-upTrue-up is an adjustment that corrects an amount previously calculated on an estimate or an interim basis, such as a management fee charged on a provisional figure, an expense allocated on the wrong ratio or a capital call made before a closing, so that the final figures match the basis the limited partnership agreement specifies.
Capital accountA 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.
Unfunded commitmentUnfunded commitment is the portion of a limited partner's capital commitment that the fund has not yet called, calculated as total commitment less contributions to date plus any distributions the LPA makes recallable, and represents the LP's remaining obligation to fund capital calls.