Recycling Provision
A fund term allowing the GP to reinvest early distributions rather than immediately returning them to LPs.
A recycling provision lets a GP reinvest proceeds from an early exit (or the return of an unused reserve) back into new or follow-on deals, rather than distributing that cash straight back to LPs. This effectively extends the fund's investable capital beyond its original committed amount, letting the GP deploy more total dollars over the fund's life without calling additional capital.
Recycling is typically capped (e.g., limited to returning up to 100-125% of committed capital total across the fund's life) and time-limited to the fund's active investment period, and it must be explicitly authorized in the fund's limited partnership agreement.
LPs should understand a fund's recycling terms before committing — aggressive recycling can meaningfully increase a GP's effective deployable capital and fee-generating base beyond the headline fund size, which changes the real economics of the commitment.
Does recycling increase the total size of a fund?
It increases the total capital deployed into deals without increasing LP commitments, by reinvesting early proceeds instead of distributing them — the committed fund size on paper stays the same.
Related terms
Run the numbers yourself: dilution, SAFE conversion, and fund-returner calculators.