Performance Measures & Ratios
6 plain-language definitions covering performance measures & ratios for alternative investment funds — including IRR - Internal Rate of Return, NAV - Net Asset Value, DPI - Distributed to Paid In, TVPI - Total Value to Paid In.
IRR - Internal Rate of Return
Funds usually show both gross and net IRR. Gross IRR is the total annual return before fees, carry and the fund's operating expenses - a measure of return on the portfolio. Net IRR includes fees, carry and operating expenses, and is the figure that matters to investors.
Unlike multiples, IRR includes the time element: all else equal, the measure declines the longer it takes to realise a given gain.
DPI - Distributed to Paid In
The cumulative amount a fund has distributed to investors relative to their total contributions. DPI is net of fees and carried interest, and investors focus on it as it reflects return of, and return on, investment.
Like other multiples it contains no time element - unsophisticated but easy to use and widely cited.
TVPI - Total Value to Paid In
The value of remaining investments and other assets (NAV) plus total distributions to date, relative to total capital paid in. Recallable distributions should be in the numerator and reinvested capital in the denominator. TVPI = RVPI + DPI.
Like other multiples it ignores time - unsophisticated but easy to use and widely cited.
RVPI - Remaining Value to Paid In
The current value of all remaining holdings in the fund relative to the total contributed to date; any reinvested capital should be in the denominator.
Like other multiples it ignores time - unsophisticated but easy to use and widely cited.
FMV - Fair Market Value
The price an asset would fetch in the market, assuming a knowledgeable, willing buyer and seller, no outside pressure to transact, and a reasonable period to complete.
An FMV estimate is subjective - influenced by time, place, comparable transactions and the valuation principles used. In private equity it usually refers to the value of the fund's investments, ignoring the fund's other assets and liabilities.