Capital Call Lines: Liquidity Shouldn’t Come at the Cost of Flexibility

Capital call lines have become a standard tool in venture and private equity. They make fund operations smoother, but over time they have started doing more than they were designed for. I think it’s time for GPs and LPs to take a closer look at what they actually solve—and what they might be masking.

What capital call lines were meant to do

Originally, capital call lines were a simple convenience. They helped GPs manage short-term timing mismatches between investments and LP contributions. A GP could draw on the line to close a deal quickly, then call capital a few weeks later to pay it back. Everyone benefited from the efficiency.

How they’ve evolved

Today, capital call lines are often used for much longer periods, sometimes even to inflate fund performance metrics like IRR. When capital is delayed for months, or even quarters, early paper returns look better. But that can create distortions:

• LPs may not know how much of their commitment is effectively deployed.
• GPs are paying interest costs that reduce long-term returns.
• Liquidity risk shifts from the fund to the credit provider.

This dynamic has made capital call lines a kind of quiet leverage in the system. They offer convenience, but they can also create fragility if used as a substitute for genuine liquidity planning.

Why this matters for LPs and GPs

For LPs, capital call lines can mask how your cash is really working. You might think your capital is still “unfunded,” but in practice it’s already supporting investments. When multiple funds extend their lines, liquidity planning gets harder and cross-portfolio exposure goes up.

For GPs, overreliance on call lines can narrow your flexibility. If markets shift or valuations compress, you may be repaying debt while trying to preserve runway for follow-on rounds. The line that once helped you move fast can start working against you.

A more flexible model for liquidity

At Turbine, we take a different view. Instead of relying on short-term leverage at the fund level, we help LPs access liquidity directly, using their fund positions as collateral. This approach keeps both GPs and LPs aligned. It gives LPs access to cash without forcing early exits, and it lets GPs manage the portfolio without added debt pressure.

By separating fund operations from liquidity needs, you preserve capital efficiency without distorting fund performance or leverage. You also give investors more choice in when and how they access liquidity, rather than embedding it in the fund’s structure.

Where this is heading

The market is starting to recognize that liquidity and leverage are not the same thing. Capital call lines have their place, but they are not a universal solution. The better answer is to build tools that give investors liquidity when they need it, without forcing funds to take on balance-sheet risk.

At Turbine, that’s the model we’re building. We believe liquidity should serve long-term value creation, not work against it.

— Mike Hurst, Founder, Turbine

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