Asset allocation|Explainer
Commitment pacing
You cannot buy a private markets allocation in one go. You commit, wait to be called, and get money back years later. Pacing is the plan that keeps the allocation near target anyway.
The short version
Commitments are not investments
When an investor commits to a closed-end fund, the manager draws the money over time, typically over about five years, and returns it as investments are sold, with the fund’s life usually on the order of ten to twelve years in total, as Kaplan and Schoar describe. At no point is the whole commitment invested at once.
Commitment pacing is deciding how much to commit each year so that the amount actually invested (the NAV) stays close to a target, while there is always cash for the calls still to come (the uncalled or unfunded commitments).
A classic model: calls, distributions and growth
The best-known public framework is a model published by two officers of the Yale University Investments Office, Takahashi and Alexander. Calls are a share of what is still uncalled; distributions are a share of NAV that rises with the fund’s age; and the investments grow in between. It is simple enough to update each year with actual data, and an unfavourable exit market can be reflected by slowing the distribution rate.
Worked example|Hypothetical
One US$100 commitment, year by year
Takahashi–Alexander structure with teaching inputs: calls of 25%, 33.3%, then 50% of what is uncalled; 12-year life; “bow” 2.5; growth 8% a year; no income. Illustrative only, before fees and carry.
| Year | Calls | Distributions | NAV | Uncalled |
|---|---|---|---|---|
| Year 1 | 25.0 | 0.0 | 25.0 | 75.0 |
| Year 2 | 25.0 | 0.3 | 51.7 | 50.0 |
| Year 3 | 25.0 | 1.7 | 79.1 | 25.0 |
| Year 4 | 12.5 | 5.5 | 92.4 | 12.5 |
| Year 5 | 6.2 | 11.2 | 94.9 | 6.2 |
| Year 6 | 3.1 | 18.1 | 87.5 | 3.1 |
| Year 7 | 1.6 | 24.6 | 71.5 | 1.6 |
| Year 8 | 0.8 | 28.0 | 50.0 | 0.8 |
| Year 9 | 0.4 | 26.3 | 28.1 | 0.4 |
| Year 10 | 0.2 | 19.2 | 11.3 | 0.2 |
| Year 11 | 0.1 | 9.8 | 2.5 | 0.1 |
| Year 12 | 0.0 | 2.7 | 0.0 | 0.0 |
US$. Rounded to one decimal. NAV peaks at 94.9 in year 5, so even at its peak a single commitment is never fully invested at the same time.
From one fund to a programme
Investors therefore commit every year, so that new funds are calling while older ones are paying back. In this example, if an investor committed the same amount every year for twelve years, total NAV would settle at about 5.9 times the annual commitment, with about 1.75 times the annual commitment still uncalled.
Uncalled at steady state ≈ 16.8 × 1.75 ≈ 29
Real programmes are messier: the rest of the portfolio moves too, funds differ by strategy and vintage, and conditions in the year a fund starts can shape its results. That is why the CFA Institute’s curriculum stresses diversifying across vintage years.
When distributions slow
The model’s biggest sensitivity is the pace of distributions. Bain reports that distributions as a share of NAV held essentially flat at 14 per cent in 2025, below 15 per cent for four years running, an industry record. Jefferies puts LPs’ annual distribution yield near 10 per cent in the first half of 2026, against an average of 25 per cent since 2001. In a survey cited by Bain, 53 per cent of LPs said undrawn commitments were limiting new ones.
Slower distributions mean NAV stays higher for longer, so a plan built on old assumptions can drift above target. Pacing models are rerun each year for exactly this reason.
Questions an allocator asks each year
- What distribution rate is the plan assuming, and what if it halves?
- How much is uncalled, and where would the cash come from in a bad year?
- How far can NAV drift from target before we change the commitment budget?
- Are we spreading commitments evenly across vintage years?
Education only. This page explains how fund structures and terms generally work. It is not investment, legal or tax advice and is not a view on any fund, manager or product. Worked examples are hypothetical.
Go deeper
Build a full pacing plan
Commitment pacing and cash-flow forecasting is taught in depth in our later courses for allocators, with the spreadsheet model behind this example. They are not on sale yet; the newsletter will say when each one opens.
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Sources
Where the numbers come from
Cited and paraphrased. Figures are as published at the date shown and may since have changed. Checked by us between 21 and 27 October 2026.
- Kaplan, S. and Schoar, A., “Private Equity Performance: Returns, Persistence and Capital Flows”, NBER Working Paper 9807 (2003). www.nber.org/papers/w9807
- Takahashi, D. and Alexander, S. (Yale University Investments Office), “Illiquid Alternative Asset Fund Modeling”, working paper (Jan 2001), later published in the Journal of Portfolio Management. PDF copy
- Bain & Company, Global Private Equity Report 2026 (Feb 2026). www.bain.com
- Jefferies, Global Secondary Market Review (July 2026). An adviser’s market review. www.jefferies.com
- CFA Institute, Investments in Private Capital: Equity & Debt, 2026 refresher reading summary. www.cfainstitute.org