How Should a Family Plan for Capital Calls During a Market Downturn?

Plan capital calls ahead of a downturn by matching commitments to liquid resources and expected timing. Add calls to a schedule of family spending, tax bills, debt payments, and other obligations. Test whether the family can meet them if distributions are delayed and marketable assets lose value.

Build a Complete Commitment Schedule

For each fund or private investment, record the amount committed, amount already funded, remaining commitment, expected call timing, and notice terms. Add recurring family needs, upcoming taxes, debt service, and planned investments. Use one schedule across entities to show total liquidity demands and evaluate each commitment in that context.

Private investments may call capital when other parts of the portfolio are under pressure. A plan based on normal market conditions can leave the family scrambling. Identify available cash sources, how quickly each can be accessed, and any problems that using them could create elsewhere.

Stress Timing and Cash Availability

Test a scenario where several calls arrive close together, distributions stop, and public assets fall. Include delays in selling private holdings and lower proceeds from a planned exit. Ask whether the family can meet each obligation without unexpected borrowing or selling assets at a poor time.

Set aside liquidity for known commitments and identify assets for unexpected needs. Do not count the same cash toward family spending and tax payments, as well as capital calls. The capital call and liquidity planner can help model timing and available resources. Review cash reserves for taxes, spending, and commitments as well.

Coordinate Commitments With the Portfolio

Consider calls in the context of the full portfolio and the family's capacity to bear risk. A commitment that is reasonable on its own may become difficult alongside concentrated assets, borrowing, or operating business needs. The Single Family Office describes cash flow and liquidity as persistent concerns in direct and co-investments. It also discusses using surplus funds and limiting reliance on borrowing.

For each commitment, understand what happens if the family cannot fund a call on time. Review the governing documents with your attorney, since consequences depend on the terms and jurisdiction. Keep a record of the call process, responsible staff, notice handling, and approval authority. The operational processes guide can help establish how these responsibilities are handled.

Review the Plan as Conditions Change

Update the schedule when new commitments are made, distributions arrive, spending changes, or a business needs cash. Set a regular review with the investment committee and identify a clear escalation path if projected liquidity falls below the family's needs. See planning liquidity across investment horizons and avoiding forced sales. Talk with your attorney or CPA about legal and tax specifics.

Cash flow and liquidity are always a concern with any direct/co-investment, and to circumvent this, we like to deploy surplus funds only and not leverage too much.

Sources: The Single Family Office. Informational only, not financial, legal or tax advice.