Private equity performance is described through several measures. Each answers a different question about value, cash returned and timing. Reading them together provides a more useful comparison than relying on a single percentage.
Paid-in capital, distributions and remaining value
Start with the dates and amounts of contributions, distributions and the estimated value still held. State whether the figures are fund-level, deal-level or investor-level, and whether they are gross or net of the relevant costs.
| Metric | Calculation | What it describes |
|---|---|---|
| DPI | Distributions divided by paid-in capital. | Cash returned relative to cash contributed. |
| RVPI | Remaining value divided by paid-in capital. | Estimated value still held relative to contributions. |
| TVPI | DPI plus RVPI. | Distributed and remaining value together. |
| IRR | Rate that brings the net present value of dated cash flows to zero. | A money-weighted measure sensitive to timing. |
An unrealised valuation is not cash returned. Show DPI and RVPI separately even when reporting TVPI.
A simple multiple example
Assume an investor has paid EUR 100,000, received EUR 40,000 and has a remaining reported value of EUR 80,000:
- DPI = 40,000 / 100,000 = 0.4x.
- RVPI = 80,000 / 100,000 = 0.8x.
- TVPI = 0.4 + 0.8 = 1.2x.
The total value exceeds the contribution in this illustration, but EUR 80,000 remains an estimate rather than realised proceeds. The figures alone do not establish an annual return.
Timing changes IRR
Consider two hypothetical investments with no fees or interim distributions:
| Cash flow | Example A | Example B |
|---|---|---|
| Initial payment | EUR 100,000 | EUR 100,000 |
| Final payment received | EUR 150,000 after 5 years | EUR 150,000 after 10 years |
| Final multiple | 1.5x | 1.5x |
| Annual IRR | Approximately 8.45% | Approximately 4.14% |
The multiple is identical; the timing differs. For these single-payment examples, the annual rate is the fifth or tenth root of 1.5, minus one. With several contributions and distributions, calculate IRR from the complete dated cash-flow schedule.
Fund and investor perspectives
An investor paying upfront has a different cash-flow schedule from one funding staged capital calls. Fees, share classes and distribution arrangements can also differ. Those contractual differences should be recorded rather than inferred from the type of investor.
A fund's target IRR is not automatically an investor's net IRR. Ask which contributions, fees, valuations and distribution dates are included. Equally, TVPI does not capture the time required to receive value, so it should not replace timing measures altogether.
Golden Visa research
For an investment associated with Golden Visa, distinguish the fund's cash-flow model from the applicant's legal obligations. Confirm the treatment of contributions, redemptions and distributions with qualified counsel for the actual transaction.
Do not assume that a distribution can be used or reinvested solely because it is labelled income or return of capital. The legal and tax analysis is separate from the calculation of investment performance.
Targets, scenarios and results
A manager target, a KID scenario, a hypothetical simulation and reported performance are different types of information. Label them clearly and compare like with like.
The J-curve guide explains timing during deployment. Our fee and distribution model illustrates how terms interact.
Portugal Funds connects performance information with documents, fees and portfolios. Its research is independent and does not provide personal fund recommendations.