Capital Commitment

78 Pages Posted: 2 Sep 2014 Last revised: 12 Jan 2022

See all articles by Elise Gourier

Elise Gourier

ESSEC Business School

Ludovic Phalippou

University of Oxford - Said Business School

Mark M. Westerfield

University of Washington

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2022


Over ten trillion dollars are allocated to private market funds that require outside investors to commit to transferring capital on demand; most of these funds are Private Equity (PE). We show within a novel dynamic portfolio allocation model that ex-ante commitment has large effects on investors’ portfolios and welfare, and we quantify those effects. Investors are under-allocated to PE and are willing to pay a larger premium to adjust the quantity committed than to eliminate other frictions, like timing uncertainty and limited tradability. Perhaps counter-intuitively, commitment risk premiums increase with secondary market liquidity and they do not disappear even if investments are spread over many funds.

Keywords: Capital commitment, private equity, commitment risk, liquidity premium

JEL Classification: G11, G12

Suggested Citation

Gourier, Elise and Phalippou, Ludovic and Westerfield, Mark M., Capital Commitment (January 1, 2022). Netspar Discussion Paper No. 06/2014-035, Available at SSRN: or

Elise Gourier

ESSEC Business School ( email )

3 avenue Bernard Hirsch
Cergy-Pontoise, 95021


Ludovic Phalippou (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Mark M. Westerfield

University of Washington ( email )

Box 353200
Seattle, WA 98195
United States


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