PE Fund Performance Metrics: TVPI Vs. MOIC Vs. DPI and Gross Vs. Net IRR

Why It Matters

Understanding gross versus net metrics and the timing of DPI and TVPI is essential for investors to accurately assess private‑equity fund health and make informed allocation decisions.

Key Takeaways

• Gross IRR and MOIC include both realized and unrealized values.
• Fees and carried interest significantly reduce net IRR versus gross IRR.
• DPI reflects cash returned; low DPI early in fund life is normal.
• TVPI combines net value and called capital to gauge total fund performance.
• Valuation assumptions and fund lifecycle stage crucial for interpreting metrics.

Summary

The video walks through private‑equity fund performance measurement, focusing on TVPI, MOIC, DPI and the distinction between gross and net IRR. Using a simplified Excel model, the instructor demonstrates how to calculate each metric, allocate management fees, and apply carried‑interest rules to a hypothetical fund with a single realized exit (Cyber Sentinel AI).

Key data points include a gross multiple of invested capital (MOIC) of roughly 1.9× and a gross IRR just above 20%. Management fees start at 2% of committed capital and drop to 1.5% after the investment period, while carried interest is modeled at 20% of profits. After accounting for these fees, net IRR falls about 6‑7 percentage points, and DPI sits at 2× in year six of a ten‑year fund, which the presenter notes is not alarming given the fund’s lifecycle stage.

The instructor highlights concrete calculations: the realized exit of $1.4 bn generates $187.5 m of carried interest, which is subtracted from gross value to derive net value. He also shows how to allocate fees to individual portfolio companies using cost‑basis weighting and how to enforce a “min‑zero” guard on carried‑interest calculations to avoid positive carry on loss sales.

The overarching implication is that raw multiples or IRR figures can be misleading without context. Investors must consider the fund’s age, strategy, and the assumptions behind unrealized valuations, as well as the impact of fees, to gauge true performance and benchmark against public‑market returns.

Original Description

Learn more here: https://breakingintowallstreet.com/private-equity-funds-of-funds/

This tutorial gives you a full crash course on PE fund performance metrics, including TVPI, DPI, RVPI, and Gross vs. Net MOIC and IRR.

Files & Resources:

https://breakingintowallstreet.com/kb/financial-sponsors/private-equity-fund-performance-metrics/

Table of Contents:

0:00 Introduction

1:40 Summary of Gross IRR and MOCI, TVPI, Net IRR, DPI, and RVPI

6:27 Metrics' Interpretation

7:57 Part 1: Fee Calculations and Formulas

12:05 Part 2: The “Net” Metrics (TVPI, DPI, and Net IRR)

14:18 Part 3: Valuations, Waterfalls, and Recycling

16:27 Recap and Summary