I would like to understand the difference between capital call and capital commitment and needs to know the importance of these items in portfolio management
When a limited partnership in PE (private equity) is established, each limited partner commits some amount, say x, and that caps their liability (Commitment). As the PE firm usually will make investment over time or in the future, it would not make much sense for the LPs to hand over the money to the PE firm when the partnership is formed. Instead the PE will call capital (Captial Call) as and when it identifies investment opportunities. Partners will then need to provide the capital within an agreed period after the capital is called as long as it is within the agreed mandate.