What is Drawdown Fund?
A drawdown fund is the traditional private markets structure: LPs commit capital up front, but the GP "draws it down" via capital calls only as investments are made — typically over a 3-5 year investment period within a 10-year fund life.
In a drawdown structure, an LP's commitment is a contractual promise, not a wire. The GP calls capital in increments as deals close — usually 20-30% of commitments per year during the investment period. Uncalled commitments stay in the LP's hands (earning returns elsewhere) until called, which is why fund IRRs are calculated on called capital, not committed capital.
The structure shapes everything about private markets investing: LPs must keep liquidity ready for unpredictable calls (and face penalties for defaulting on one), GPs manage pacing against a finite investment period, and distributions flow back as assets are sold rather than at the LP's discretion. The drawdown model's alternative — evergreen, open-end structures with periodic liquidity — has grown rapidly, but the drawdown fund remains the default for institutional private equity and venture capital.
Also known as: drawdown structure, capital call fund, closed-end fund