A commitment to a PE, VC, or private credit fund is not a check you write up front — it is a right the general partner has to draw against you on roughly ten business days’ notice over the fund’s four-to-six-year investment period. A $1,000,000 commitment will typically be drawn in five to ten irregular tranches, each $50,000 to $300,000, on the GP’s schedule, not yours. Miss a call and you are in default: the LP agreement usually allows the GP to charge default interest, dilute your stake, or in the worst case forfeit your prior contribution entirely.
The liquidity rule: hold cash or short Treasuries equal to roughly 30%–50% of aggregate uncalled commitment in vehicles that can fund a wire within the notice period. For a $3,000,000 aggregate uncalled commitment across two funds, that is $900,000 to $1,500,000 of Tier 2 capacity earmarked against the calls, not against the emergency fund. The fraction can be lower if commitments are spread across many vintages (smooths the call pattern) and higher if commitments are concentrated in one or two early-investment-period funds.
The common failure is treating the long average gap between calls as evidence that the capital can be deployed elsewhere. It cannot. The dry powder exists because calls come on the GP’s clock, often clustered into a single quarter when the GP is competing for a deal. An SBLOC (section “Asset Backed Loans (ABL)”) can serve as a backup line for the edge-case overflow, but the primary funding source should be Treasury maturities matched against the call window — the same logic as estimated taxes, with looser date matching.