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Fund Operations

Can we recycle funds only after returning the Fund's total target size to the Limited Partners?

Asked by:
Community Member
2
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17
May 03, 2023
I think the below means that first we need to return the $25M to LPs, before we can recycle? “After a Limited Partner has received cumulative distributions equal to the sum of the aggregate capital Contributions made to the Fund by such Limited Partner, the then-current amount of a Limited Partner’s Unused Capital Commitment shall be increased by an amount equal to the Recycled Amount.”
2 answers
May 03, 2023
You can recycle anything over the capital contribution.
Accepted Answer
Jul 31, 2023
The recycling provision does not refer to the Fund's target size. 

The recycling language in the Cornerstone LPA template means that:
  • After a limited partner receives distributions equal to its total capital contributions (not commitment) to the Fund;
  • The limited partner's "Unused Capital Commitment" (amount available to be called and deployed) will be increased by an amount up to the Recycled Amount. 
For example:
  • A limited partner commits a total of $X to the Fund, which has Y% as the Recycled Amount;
  • Total capital called is 50% after a few years;
  • The limited partner's Unused Capital Commitment is now 50%;
  • There is an exit/distribution that returns 100% of the limited partner's capital contribution;
  • The limited partner's Unused Capital Commitment can be increased by up to Y% of the total commitment. 

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