IRR, TVPI and DPI explained

Private equity and venture capital funds don't report monthly returns like a hedge fund. Money goes in and out at different times, so performance is measured with cash-flow-based figures.

The main measures

• IRR (internal rate of return): the annualized return that accounts for when money was called and returned. Sensitive to timing: early distributions or subscription credit lines can raise it.
• TVPI (total value to paid-in): (distributions + remaining value) ÷ capital paid in. A 1.8x TVPI means each $1 invested is worth $1.80, realized or not.
• DPI (distributions to paid-in): cash actually returned ÷ capital paid in. The "realized" part; 1.0x means you have your money back.
• RVPI (residual value to paid-in): the unrealized part still held at the manager's valuation. TVPI = DPI + RVPI.
• PME (public market equivalent): compares the fund's cash flows with what the same cash flows would have earned in a public index.

Reading a track record

• Net vs gross: ask for net figures, after fees and carry.
• Vintage year: compare a fund only with funds that started investing in the same year.
• Young funds: early figures are mostly unrealized (low DPI) and can be in the J-curve.
• Quartiles: "top quartile" claims depend on the benchmark and date used; ask which.

Form D does not contain performance. AltMountain shows each fund's filing data: see the private equity and venture capital directories.

Education, not advice. This guide explains general rules and market practice. It is not legal, tax or investment advice, not an offer or solicitation, and not a recommendation of any fund. Rules change; confirm details with the SEC and a qualified professional. Disclosures