Private equity firms had raised piles of capital when the going was good, but thanks to the global credit crisis, many of these firms are finding an increasing number of investors who aren’t honouring their capital commitments. While raising capital, private equity funds get commitments from investors such as pension funds, university endowments, hedge funds, fund of funds and high net-worth individuals. These commitments are drawn down as and when the fund makes an investment. This means that till the capital is deployed, its control rests with the investors, collectively referred to as limited partners (LPs). Because of the huge erosion in the market value of their fixed income and equity exposure, many of these LPs, especially the pension funds and endowments, could suddenly find themselves overexposed to private equity, an asset class that is not marked to market. If they decide to reallocate assets, private equity funds may find themselves in a situation they last faced during the dotcom bust, when many LPs pulled out and funds were left with little capital to “draw down”. Another problem could arise from hedge funds or institutions who have been taken over by larger institutions. […]