Private Equity Performance Metrics — Calculations with Practical Examples

Private Equity Performance Metrics — Calculations with Practical Examples In Private Equity Fund Accounting, performance metrics help investors, fund managers, and administrators understand how much money a fund has made, how much has been returned to investors, how much value remains, and how quickly returns were generated. We'll use Summit Equity Fund I as our example throughout. 1. Common example for all metrics Assume the fund has the following performance as of 31 December 2026. Particulars Amount Total LP capital contributed (paid-in capital) ₹50 crore Cumulative distributions to LPs ₹30 crore Remaining NAV attributable to LPs ₹45 crore Total value (distributions + NAV) ₹75 crore Unfunded commitments ₹50 crore The fund has received ₹50 crore from investors, already returned ₹30 crore, and still holds investments and other net assets worth ₹45 crore attributable to those investors. 2. Main PE performance metrics MOIC — Multiple on Invested Capital 1.50× \[ \text{MOIC}=\frac{\text{Total Investment Value}}{\text{Invested Capital}} \] \[ =\frac{₹30\text{ Cr}+₹45\text{ Cr}}{₹50\text{ Cr}}=\boxed{1.50\times} \] For this simplified fund-level example, total value divided by paid-in capital is 1.50×. Deal-level MOIC may instead use the investment's cost and proceeds plus residual value. DPI — Distributions to Paid-In Capital 0.60× \[ \text{DPI}=\frac{\text{Cumulative Distributions}}{\text{Paid-In Capital}} =\frac{30}{50}=\boxed{0.60\times} \] Investors have received ₹0.60 in distributions for every ₹1 contributed. RVPI — Residual Value to Paid-In Capital 0.90× \[ \text{RVPI}=\frac{\text{Remaining NAV}}{\text{Paid-In Capital}} =\frac{45}{50}=\boxed{0.90\times} \] The fund still holds ₹0.90 of residual NAV for every ₹1 contributed. TVPI — Total Value to Paid-In Capital 1.50× \[ \text{TVPI}=\frac{\text{Distributions}+\text{Residual NAV}}{\text{Paid-In Capital}} \] \[ =\frac{30+45}{50}=\boxed{1.50\times} \] The fund's combined realised distributions and remaining value represent 1.50 times paid-in capital. How the 1.50× total value is divided DPI 0.60× (40%) RVPI 0.90× (60%) TVPI = DPI + RVPI = 0.60× + 0.90× = 1.50× What about DVPI? DVPI is not a commonly standardised PE performance abbreviation. You may mean DPI, which measures distributed value, or RVPI, which measures remaining value. Some systems use custom labels, so DVPI should be defined from that system's methodology before calculating it. 3. IRR — Internal Rate of Return IRR measures the annualised return while considering when money was invested and when distributions were received. Unlike MOIC or TVPI, IRR is sensitive to timing. Practical example: Summit Equity Fund I Assume the following cash flows, measured at year-end intervals. Date Capital calls Distributions Remaining NAV 31 Dec 2022 ₹20 Cr — — 31 Dec 2023 ₹20 Cr — — 31 Dec 2024 ₹10 Cr — — 31 Dec 2025 — ₹10 Cr — 31 Dec 2026 — ₹20 Cr ₹45 Cr Total ₹50 Cr ₹30 Cr ₹45 Cr For IRR purposes, the ₹45 crore ending NAV is treated as a positive terminal value, not as an actual cash distribution. Net cash flows used for IRR (₹ crore) ₹-25 Cr₹0 Cr₹25 Cr₹50 Cr₹75 Cr20222023202420252026 The final ₹65 Cr includes ₹20 Cr distribution plus ₹45 Cr residual NAV. The IRR is the discount rate \(r\) that makes the net present value of these cash flows equal to zero: \[ 0=-20-\frac{20}{(1+r)}-\frac{10}{(1+r)^2} +\frac{10}{(1+r)^3}+\frac{65}{(1+r)^4} \] Approximate annual IRR 14.7% Using equally spaced annual cash flows; actual fund reporting generally uses transaction dates. In Excel, you can calculate: =IRR(B2:B6) for equally spaced annual cash flows. For actual dated transactions, use: =XIRR(B2:B6,A2:A6) where column A contains dates and column B contains signed cash flows. The example's dated XIRR will be close to the annual IRR. Why IRR and MOIC can tell different stories Suppose an investor contributes ₹10 crore and receives ₹20 crore. Holding period MOIC Annualised IRR 1 year 2.00× 100.0% 3 years 2.00× 26.0% 5 years 2.00× 14.9% 10 years 2.00× 7.2% The investment doubles in every case, but the annualised return falls as the holding period increases. 4. Additional important PE performance metrics Metric Formula Practical result PIC / Paid-In Capital Total capital contributed ₹50 Cr Unfunded Commitment Commitment − Contributions ₹100 − ₹50 = ₹50 Cr Paid-In Percentage Paid-in ÷ Commitment × 100 50% Net Value Gain Distributions + NAV − Paid-in ₹25 Cr Value Gain % Net value gain ÷ Paid-in × 100 50% Loss Ratio Losses ÷ Relevant investment cost Depends on investment losses Gross IRR IRR before specified fund-level fees, expenses and carry Requires deal-level gross cash flows Net IRR IRR based on investor cash flows and residual NAV after applicable deductions ~14.7% in our simplified LP example Important: Gross IRR and Net IRR cannot be reconciled simply by subtracting a fixed fee percentage. Their cash flows must be constructed separately. 5. Interactive PE performance calculator Change the numbers to calculate the multiples for your own fund. Paid-in capital (₹ Cr) Distributions (₹ Cr) Residual NAV (₹ Cr) Total commitments (₹ Cr) TVPI 1.50× DPI 0.60× RVPI 0.90× Fund-level MOIC 1.50× Unfunded commitment ₹50.00 Cr Total value gain ₹25.00 Cr Reset exampleIRR requires dated cash flows, so it cannot be calculated from these four aggregate values alone. 6. How these metrics appear in a PE fund performance report Summit Equity Fund I Illustrative LP performance summary · 31 Dec 2026 INR Net IRR ~14.7% TVPI 1.50× DPI 0.60× RVPI 0.90× Paid-in ₹50 Cr Residual NAV ₹45 Cr Performance is illustrative and does not represent an actual fund. IRR assumes the dated capital calls, distributions and terminal NAV shown above. 7. Impact on Fund Accounting and NAV These performance metrics are calculated from accounting records; they are not themselves journal entries. - Capital contributions increase fund cash and partners' capital and are included in paid-in capital. - Distributions reduce cash and the relevant partners' capital or distribution balances and increase DPI. - Fair value gains increase investment carrying value and generally NAV, subject to accounting classification and other adjustments. This increases RVPI and TVPI if all else is unchanged. - Management fees, fund expenses and applicable carry reduce investor NAV and therefore can reduce net TVPI and net IRR. - IRR is calculated using dated investor-level cash flows and ending NAV, not merely the current trial balance. For professional reporting, it's also worth covering PME (Public Market Equivalent), Direct Alpha, Gross vs Net IRR, since-inception IRR, investment-level MOIC, and the difference between realised and unrealised returns. For your Private Equity training course, I recommend dividing this into two practical video modules: Part 1: MOIC, DPI, RVPI and TVPI with NAV reconciliation, and Part 2: IRR, XIRR, Gross vs Net IRR and performance reporting, using the same Summit Equity Fund I example throughout.