An endowment of Rs 3,000 crore wants 10% of NAV in private equity within five years. Capital is called 25%, 35%, 25% and 15% over four years and distributions start in year four. How much must it commit each year to reach Rs 300 crore of NAV?

Commit about Rs 72 crore a year, Rs 358 crore in all, to reach Rs 300 crore of NAV by year five. By then only Rs 265 crore has been called, Rs 53 crore has already come back, and Rs 93 crore is still owed to funds, which must stay liquid. Keep committing Rs 72 crore a year and NAV overshoots to about Rs 451 crore by year ten, so the pace must fall to about Rs 45 crore a year once the target is reached.

Because a commitment is a promise to pay later, not money invested today. It is like booking a table for a large group: guests arrive over the evening, and the first ones leave before the last ones sit down, so the room is never as full as the booking. A fund draws its commitment over four years and starts returning cash in its fourth, so at any moment a good part of each commitment is either not yet invested or already paid back. A single Rs 300 crore commitment in year one peaks at only about Rs 349 crore in year 4 and shrinks from there.

Model five vintages, one a year, each following the call and distribution pattern, and solve for the commitment that makes year-five NAV equal Rs 300 crore. The answer is about Rs 71.5 crore a year, Rs 358 crore of commitments in total, about 1.19 times the target. NAV builds as 20, 71, 147, 230, 300 over the five years. Of the Rs 358 crore committed, Rs 265 crore has been called and Rs 53 crore has already come back as distributions.

Keep committing Rs 72 crore a year and the pipeline keeps filling: NAV reaches about Rs 451 crore by year ten, 15% of the endowment. To hold Rs 300 crore steady, the commitment pace must drop to about Rs 45 crore a year once the programme matures, which is why endowments model pacing every year rather than setting a number once. The other risk is the denominator effectWhen public markets fall, the total fund shrinks, so the private allocation becomes a bigger share even though nothing about it changed.: if public markets fall 25% and private NAVs lag, private equity jumps from 10% to about 13% of the fund, and the committee may have to pause commitments just when prices are attractive.

And keep the liquidity visible. The Rs 93 crore still owed at year five can be called at short notice, often in a downturn when distributions dry up. A sensible rule keeps uncalled commitments comfortably covered by liquid assets, bonds and cash, which for Chinar is easy at Rs 93 crore against Rs 3,000 crore. The limitation is the pattern itself: calls and distributions vary widely by fund and by year, so these numbers are a plan to revise, not a schedule to trust.