Private equity fund managers (general partners or GPs) are using money promised by investors (limited partners or LPs) as security to borrow from banks. The Economist magazine says, in a recent article on the Abraaj crisis, says investors are becoming “warier of private-equity firms’ less orthodox tactics”.

The magazine says that GPs use these “subscription lines” to make investments without drawing down investors’ funds. This can then improve the returns they can offer investors – and by implication their performance fees. The article estimates about $400bn of this debt is used worldwide.

 It says that after Abraaj defaulted on several facilities, the banks called on the LPs to pay up. It quotes Kelly DePonte of Probitas Partners, which advises firms on raising capital: “They were not best pleased.”

The Economist claims the industry is getting more restrictive as LPs step up the amount of paperwork required, including reporting. This could mean that small and innovative firms – including some investing in Africa – may not be able to cope with the requirements as “side letters”—documents from each LP specifying the paperwork it requires from fund managers—now reach 100 pages, 10x what they used to be.