Fund Structure
Subscription Line of Credit
A revolving credit facility secured by LP capital commitments that GPs use to delay or smooth capital calls.
A subscription line (also called a capital call facility) is short-term debt that a fund draws against the unfunded commitments of its limited partners. Banks underwrite the facility based on the credit quality of the LP base, not the fund's portfolio. GPs use these lines to bridge investments, pay expenses, and defer capital calls.
The operational benefit is real: fewer capital calls and cleaner accounting. The reporting consequence is that headline IRR is mechanically inflated whenever the holding period of the loan extends, because LP capital is invested for less time. Sophisticated allocators ask GPs for both as-reported IRR and an unlevered or 'no-sub-line' IRR.
For LPs, the diligence question is not whether a fund uses a sub line - nearly all do - but how long facilities are outstanding, what the rate is, and whether the GP discloses the IRR impact transparently in quarterly reporting.