Worksheet|Asset allocation
Commitment pacing starter
How much should an investor commit each year to hold a 10% allocation? Work it out from one table.
Commitment pacing starter
A starter exercise on pacing a private markets programme, using a published cash-flow model with teaching inputs. About 25 minutes. A calculator is enough.
The data: one US$100 commitment
| Fund year | NAV | Uncalled |
|---|---|---|
| Year 1 | 25.0 | 75.0 |
| Year 2 | 51.7 | 50.0 |
| Year 3 | 79.1 | 25.0 |
| Year 4 | 92.4 | 12.5 |
| Year 5 | 94.9 | 6.2 |
| Year 6 | 87.5 | 3.1 |
| Year 7 | 71.5 | 1.6 |
| Year 8 | 50.0 | 0.8 |
| Year 9 | 28.1 | 0.4 |
| Year 10 | 11.3 | 0.2 |
| Year 11 | 2.5 | 0.1 |
| Year 12 | 0.0 | 0.0 |
Hypothetical, from the Takahashi–Alexander model: calls of 25%, 33.3%, then 50% of uncalled; 12-year life; bow 2.5; growth 8% a year; no income; before fees and carry. Sum of NAV column: 594.0. Sum of uncalled column: 175.0.
Questions
- In which year is a single commitment’s NAV highest, and what share of the commitment is invested then?
- An investor commits the same amount, X, every year for twelve years. Explain why total NAV in year 12 is the sum of the NAV column times X/100.
- The investor has a US$2,000m portfolio and a 10% private markets target. Ignoring growth in the rest of the portfolio, what yearly commitment X reaches the target at steady state?
- How much would be uncalled at steady state? Where should that cash come from?
- Distributions slow down. Does steady-state NAV for the same X go up or down? What would you change?
- Give one reason not to commit the whole amount in a single year.
Answer key
- Year 5: NAV 94.9, so about 95% of the commitment, and only briefly.
- At steady state there is one commitment of each age, from one to twelve years old, so their NAVs add up: 594.0 × X/100.
- Target NAV = 10% × 2,000 = US$200m. X = 200 ÷ 5.94 ≈ US$33.7m a year.
- 1.75 × 33.7 ≈ US$59m uncalled. It has to sit in assets that can be sold or drawn when calls arrive: cash, bonds or listed assets, plus distributions from older funds.
- Up: money stays invested longer, so NAV runs above target. Lower the yearly commitment, or rebalance (for example through a secondary sale). Rerun the model every year with actual data.
- Vintage-year diversification: conditions in the year a fund starts can shape its results, and committing over several years spreads that risk.
The ideas behind this sheet are in Commitment pacing and The J-curve explained.
Education only. General educational material, not investment, legal or tax advice. All funds, managers and numbers are hypothetical. Discuss any real decision with a qualified adviser.
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Sources
Where the numbers come from
Cited and paraphrased. Checked by us in October 2026.
- Takahashi, D. and Alexander, S., “Illiquid Alternative Asset Fund Modeling” (Yale University Investments Office working paper, 2001). PDF copy
- CFA Institute, Investments in Private Capital: Equity & Debt, 2026 refresher reading summary. www.cfainstitute.org