Recycled Capital - Reinvestment of Returned Proceeds
Recording the reinvestment of early exit proceeds or dividend recap proceeds back into new portfolio investments within the investment period, as permitted by the LPA recycling provision.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Investments at Fair Value - Portfolio Company F (New) | Asset (+) | 3,000,000.00 | - |
| Recycled Capital - Reinvested Proceeds | Equity (Memo) | - | 3,000,000.00 |
💡 Accountant's Note
Many LPAs allow the GP to recycle returned capital (from exits, dividends, or recaps) within the investment period rather than distributing it to LPs. Recycled capital does not count against the fund's investable capital limit, allowing the GP to effectively invest more than the total committed capital. The LPA typically caps recycling at a percentage of committed capital (e.g., 120%).
Practitioner & Systems Framework
💻 ERP Architecture
Maintain a recycled capital tracker showing amounts recycled, dates, source transactions, and deployment transactions. This is critical for LP reporting and verifying the fund has not exceeded the LPA's recycling cap.
⚠️ Audit Flags
Auditors recalculate total deployed capital including recycled amounts to ensure the LPA cap is not breached. Management fee calculations may be affected if recycled capital changes the invested capital base.
📄 Required Documentation
LPA recycling provisions, recycled capital calculation schedule, source exit/recap closing documents, new investment deployment documents.
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