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101 Concepts for the Level I Exam

Essential Concept 87: Evaluating a PE Fund’s Performance


Analysis of private equity fund’s financial performance includes the following:

  • Gross IRR: Relates to cash flows between the fund and its portfolio companies. It is considered a good measure of the investment management team’s track record in creating value.
  • Net IRR: Relates to cash flows between the fund and LP’s. It measures the returns to investors.
  • PIC (paid in capital): The ratio of paid in capital to date divided by committed capital.
  • DPI (distributed to paid in): Cumulative distributions paid out to LPs as a proportion of the cumulative invested capital. DPI is presented net of management fees and carried interest.
  • RVPI (residual value to paid in): Value of LPs’ shareholding held with the private equity fund as a proportion of the cumulative invested capital. RVPI is presented net of management fees and carried interest.
  • TVPI (total value to paid in): The portfolio companies’ distributed and undistributed value as a proportion of the cumulative invested capital. TVPI is the sum of DPI and RVPI. TVPI is presented net of management fees and carried interest