Committed Capital

AAA

DEFINITION of 'Committed Capital'

A contractual agreement between an investor and a venture-capital fund that obligates the investor to contribute money to the fund. The investor may pay all of the committed capital at one time, or make contributions over a period of time. This often takes place over a number of years.

Also known as "commitments".

INVESTOPEDIA EXPLAINS 'Committed Capital'

When an investor commits capital to a venture capital fund, the investor typically has many years to satisfy the agreement. Often, contributions will be made over a period of three to five years after the fund is formed.

The private equity market can be viewed as riskier than the public equity market, as returns in the private market tend to have higher dispersion of returns than the public market. Therefore, investing in the right business ventures can offer substantial rewards for top tier funds.

RELATED TERMS
  1. Financial Analysis

    The process of evaluating businesses, projects, budgets and other ...
  2. Risk Analysis

    The study of the underlying uncertainty of a given course of ...
  3. Angel Investor

    An investor who provides financial backing for small startups ...
  4. Fund Manager

    The person(s) resposible for implementing a fund's investing ...
  5. Venture Capital Funds

    An investment fund that manages money from investors seeking ...
  6. Venture Capital

    Money provided by investors to startup firms and small businesses ...
Related Articles
  1. How To Invest In Private Equity
    Mutual Funds & ETFs

    How To Invest In Private Equity

  2. Hedge Funds Go Retail
    Options & Futures

    Hedge Funds Go Retail

  3. How can I sell private company stock?
    Investing

    How can I sell private company stock?

  4. What Is Private Equity?
    Investing Basics

    What Is Private Equity?

comments powered by Disqus
Hot Definitions
  1. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  2. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  3. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  6. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
Trading Center