What should an investor verify first?

The remaining unfunded commitment amount and the fund's likely deployment quality for it going forward.

Which documents matter most?

The capital-account statement showing exactly how much has been called versus committed to date.

What is the main downside to test?

Treating the total commitment size as one number rather than separately valuing funded and unfunded portions.

How should the final decision be made?

Price the funded position and the unfunded obligation separately, not as a single blended figure.

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Buying a Partly Paid AIF Commitment

Anurag Y1 min read

Understanding the Secondary Transaction

A partly paid AIF commitment is one where the seller has only funded a portion of their total committed capital — the buyer assumes both the funded position's current value and the obligation to fund the remaining unfunded commitment as future capital calls arrive.

Reading Price, Portfolio and Obligations

Price should reflect two separate components: the value of the already-funded position (typically priced at a discount to its NAV share) and the terms on which the buyer takes on the unfunded obligation, since that unfunded portion will be called at par regardless of how the fund performs from here.

Where Secondary Liquidity Breaks

The common failure is treating the total commitment size as the relevant number for pricing, rather than separately valuing the funded and unfunded portions. A large unfunded commitment on a fund with a strong remaining pipeline of opportunities can be an advantage; on a fund with limited remaining opportunity, it's simply future capital tied up at par.

Making the Purchase or Sale Decision

Before buying, separately value: the funded portion's current NAV and expected trajectory; and the unfunded portion's likely future deployment quality, since it will be called at par regardless of the fund's performance to date.

Price the funded and unfunded portions of a partly paid commitment separately — collapsing them into a single blended number obscures very different risk.

Key takeaways

A partly paid commitment splits into a funded position (with current value) and an unfunded obligation (future calls at par).
Price the two components separately — they carry very different risk and return characteristics.
A large unfunded commitment is an advantage on a fund with strong remaining deal pipeline, a burden otherwise.
The unfunded portion will be called at par regardless of the fund's performance to date.

More in Private-Market Secondaries and Liquidity

Continue with the other chapters in this module.

Private-Market Secondaries and LiquidityWhat Is a Private-Market Secondary Transaction?A private-market secondary transaction is the sale of an existing investor's stake in a fund or private company to a new buyer, before the underlying assets have been realised through a normal exit.Private-Market Secondaries and LiquidityAIF Secondaries Explained for Individual InvestorsFor an individual investor, an AIF secondary is either an opportunity to exit an existing commitment before the fund's natural maturity, or an opportunity to buy into a fund mid-life at a price...Private-Market Secondaries and LiquidityPrimary Fund Investment vs Secondary Fund InvestmentA primary investment commits capital to a fund at inception, into a largely unknown, future portfolio — the classic blind-pool structure.