10.7% net per year over ten years: this is the “ IRR ” calculated by France Invest and EY for the French private equity sector as of the end of 2025. This figure provides a historical benchmark, but it does not reflect distributions already received, the value remaining to be realized, or the capital multiple generated.
The performance of a private equity fund must therefore be analyzed using several complementary indicators. The TVPI measures the total value realized or still held. DPI indicates the capital actually distributed. RVPI represents the residual value of the portfolio. The IRR takes into account the amount and timing of cash flows.
None of these indicators is sufficient on its own. A fund may have a high “ TVPI ” while still having distributed very little. A high “ IRR ” may result from a rapid return of capital on a limited portion of the portfolio. A high “RVPI” may reflect future potential, but it may also indicate a heavy reliance on valuations that have not yet been realized.
Understanding the relationships between the TVPI, DPI, RVPI, and IRR allows you to interpret financial reports more accurately, compare funds within a consistent framework, and distinguish between realized value and estimated performance.
Why Private Equity Performance Requires Multiple Metrics
In public markets, an investor can generally track daily prices and calculate the performance of their portfolio between two dates. In private equity, capital is called down gradually, invested over several years, and then returned as assets are sold.
Cash flows are therefore neither regular nor entirely predictable. An investor may commit 100,000 euros, pay only a portion of that amount in the first year, receive an initial distribution several years later, and maintain exposure to companies that have not yet been sold.
Performance therefore has two dimensions:
- the realized value, corresponding to the amounts already distributed;
- the unrealized value, corresponding to the equity investments still held.
Time is a third dimension. Receiving 150 euros two years after investing 100 euros is not the same as receiving the same amount five years later.
TVPI, DPI, and RVPI all measure value relative to paid-in capital. The IRR adds a cash flow schedule. Analyzing these metrics together helps answer four distinct questions:
- What is the fund's total value?
- How much did the investor actually recover?
- What is the remaining value of the portfolio?
- At what rate were the data streams generated?
What are the four key indicators you should know?
A fundamental relationship links three of these indicators:
TVPI=DPI+RVPI
This equation helps explain the composition of the total value. For example, a 1.8x TVPI ation can consist of a 1.5x DPI and a 0.3x RVPI, or a 0.4x DPI and a 1.4x RVPI.
The total figure is the same, but the level of achievement is very different.
What does the " TVPI " measure?
TVPI, or Total Value to Paid-In, measures the total value attributable to investors relative to the capital they have actually contributed.
It adds together the distributions already received and the residual value of the investments still held. It is therefore an overall multiple, consisting of a realized portion and an unrealized portion.
How do you calculate the TVPI
The simplified formula is as follows:
TVPI=("Cumulative distributions" "e" ˊ"es + residual value" "e" ˊ"s") / ("Capital paid" "e" ˊ )
Suppose an investor has contributed 100 million euros to a fund. The fund has already distributed 60 million euros, and the remaining holdings are valued at 90 million euros.
The calculation is then:
TVPI=(60+90)/100=1.5x
The fund has a total value of 1.50 euros for every euro invested. Of that 1.50 euros, only 0.60 euros has been distributed so far. The remaining 0.90 euros still depends on the future sale of the portfolio.
How should the TVPI be interpreted TVPI
A " TVPI " of less than 1x means that the sum of the distributions and the residual value is less than the paid-in capital. As of the calculation date, the fund therefore shows a loss in value.
A " TVPI " of 1x means that the total value equals the paid-in capital. This does not necessarily mean that the investor has recovered their capital, as a portion of it may still be held in the RVPI.
A " TVPI " greater than 1x indicates that the fund's total value exceeds its paid-in capital. This difference does not automatically constitute a definitively realized gain.
The fund’s maturity must be taken into account. A 1.3x “ TVPI ” may be encouraging for a relatively new fund, but insufficient for a fund nearing liquidation, depending on its strategy, fees, age, and risk profile.
What are the limitations of the TVPI ?
TVPI s do not take into account the time required to create value. A 1.5x TVPI achieved in two years does not represent the same pace of performance as a 1.5x TVPI achieved in eight years.
It also combines two components of different types:
- the distributions that were received;
- the residual value, which remains an estimate.
A fund whose " TVPI " relies primarily on RVPI is more dependent on valuation assumptions and future exit conditions. The " TVPI " must therefore always be broken down into DPI and RVPI.
What does the DPI measure?
The DPI, or Distributed to Paid-In, measures the cumulative distributions received by investors relative to the capital they have contributed.
This is the indicator most directly linked to actual performance. The amounts taken into account were distributed to investors in the form of cash or, in some cases, securities.
How do you calculate the DPI?
The simplified formula is:
DPI = ("Cumulative distributions" "e" ˊ"es" ) / ("Capital paid" "e" ˊ )
In our example, the fund distributed 60 million euros out of 100 million euros contributed:
DPI = 60/100 = 0.6x
The investor thus recovered 60% of the capital invested. This does not mean that the remaining 40% was lost. The fund still holds equity interests, the value of which is reflected in the NAV.
What does a DPI greater than 1 mean?
A DPI of 1x means that the cumulative distributions equal the paid-in capital. The investor has recovered the equivalent of their contributions, regardless of the residual value still held.
A DPI of 1.5x means that the fund distributed 1.50 euros for every euro invested. The return is therefore greater than the initial capital.
An DPI greater than 1 does not guarantee that all investments have been profitable. A small number of successful divestitures can offset other unprofitable investments.
We must also examine the remaining portfolio and the cost of any potential losses.
Why does the DPI depend on the fund's maturity?
During the early years, a fund typically invests its capital and supports its portfolio companies. It is therefore normal for its DPI to be low or zero.
Distributions begin when the first companies are sold, refinanced, or taken public. The DPI then tends to increase during the divestment phase.
Comparing the DPI of a fund launched three years ago with that of a fund that is ten years old would be of little relevance. The former may still be in the investment phase, while the latter should have already realized a significant portion of its portfolio.
The DPI must therefore be compared to that of the fund:
- from a recent vintage;
- with a comparable strategy;
- of similar maturity;
- calculated as of the same date.
What does the RVPI measure?
The RVPI, or Residual Value to Paid-In, measures the residual value of the portfolio relative to the paid-in capital.
This residual value generally corresponds to the net asset value of the holdings still held, after taking into account the factors defined in the fund’s documentation and accounting policies.
How do you calculate the NPV?
The simplified formula is:
RVPI = ("Residual value of the portfolio") / ("Capital contributed")
In our example, the remaining portfolio is valued at 90 million euros out of 100 million euros contributed:
RVPI = 90/100 = 0.9x
The fund therefore still holds an estimated value of 0.90 euros for every euro invested.
When we add the DPI of 0.6x and the RVPI of 0.9x, we get the TVPI :
0.6x + 0.9x = 1.5x
Why is the RVPI based on an estimate?
Unlisted companies do not have a daily market price. Their valuation is based on methods such as:
- the multiples of comparable companies;
- recent transaction multiples;
- discounted cash flow;
- the most recent financing round;
- financial and operational results;
- the prospects for release.
These methods are standardized, but they necessarily involve certain assumptions. The value obtained may differ from the price ultimately received at the time of the sale.
The RVPI should therefore be viewed as a documented estimate of the remaining value, not as an amount that is immediately available.
How should a high RVPI be interpreted?
A high RVPI may indicate that the fund still holds a substantial portfolio capable of generating future distributions.
In a young fund or a fund in its mid-life phase, this situation is normal. The majority of the value has not yet been realized.
In a mature fund, a consistently high RVPI warrants further analysis. It may indicate:
- high-performing companies retained for longer;
- unfavorable exit conditions;
- investments that are difficult to sell;
- a focus on a few assets;
- a valuation that remains uncertain;
- preparing for a spin-off or a continuation entity.
A high NAV is therefore neither positive nor negative in and of itself. Its interpretation depends on the fund’s age, the quality of its assets, and the credibility of the valuation assumptions.
What does the " IRR " measure?
IRR, or internal rate of return, measures the return on a set of cash flows by taking into account their amounts and dates.
It corresponds to the discount rate at which the net present value of cash outflows, distributions, and the residual value equals zero.
How do you calculate the IRR
The general formula finds the rate r that satisfies:
∑_(t=0)^n▒(CF_t)/(1+r)^t = 0
In this formula:
- CF_t represents the cash flow at time t;
- Capital calls are generally treated as negative cash flows;
- Dividends are treated as positive cash flows;
- The residual value is included as a notional positive cash flow as of the calculation date.
Let's take a simplified example:
- 40 million euros raised at launch;
- 30 million called after one year;
- 30 million called up after two years;
- 20 million distributed after four years;
- 40 million distributed after six years;
- 90 million in residual value at the end of the sixth year.
Paid-in capital totals 100 million euros. Distributions amount to 60 million, and the residual value is 90 million. The “ TVPI ” is therefore 1.5x, while the illustrative “ IRR ” is approximately 8.7 percent.
This calculation shows that the TVPI measures the value multiple, while the IRR expresses the rate at which that value was created according to the selected timeframe.
What is the difference between the gross amount at IRR and the net amount at IRR ?
The gross IRR e generally measures the performance of investments before certain fees incurred by investors, including management fees and the carried interest.
IRR , net measures the return to investors after taking into account applicable fees, expenses, and incentive arrangements.
The difference can be significant. Therefore, a comparison between a gross IRR and a net IRR is not relevant.
You need to check:
- the level at which the IRR is calculated;
- integrated flows;
- after deducting expenses;
- carried interest treatment;
- taking the residual value into account;
- the potential impact of credit lines.
For an investor, net in IRR s generally provide the closest measure of the actual economic cost incurred.
Why is the " IRR " sensitive to the flow schedule?
IRR places a high priority on timely distributions. As a result, two funds with the same “ TVPI ” may have very different “ IRR .”
If 100 euros grow to 150 euros in two years, the annual IRR is about 22.5%. If the same 150 euros are earned after five years, the IRR drops to about 8.4%.
The final multiple remains the same:
TVPI=1.5x
But the pace at which value is created is different.
This sensitivity is both the strength and the limitation of the “ IRR.” It allows for the consideration of time, but it can also place a great deal of weight on early distributions.
A successful initial sale can thus significantly boost a young fund’s “ IRR ,” even though a large portion of its portfolio remains unrealized. Interim “ IRR ” should therefore be interpreted with caution.
How do TVPI, DPI, RVPI, and IRR work together?
These four indicators address complementary questions:
- The " TVPI " field shows the total value.
- The DPI indicates the amount already distributed.
- The RVPI indicates the value yet to be realized.
- IRR indicates the rate of value creation.
Let's take a look at two funds, both of which have a price-to- TVPI of 1.8x.
Fund A shows:
- DPI: 1.5x;
- P/E ratio: 0.3x;
- TVPI : 1.8x.
Fund B shows:
- DPI: 0.4x;
- P/E ratio: 1.4x;
- TVPI : 1.8x.
Fund A has already realized most of its value. Fund B still relies heavily on unsold investments. Both TVPI are identical, but their risk profiles, maturities, and visibility differ.
The “ IRR ” then provides information on the timing. If Fund A distributed returns quickly, its “ IRR ” may be higher than that of Fund B. However, it is important to verify whether this difference stems from better value creation or simply from a different timing of cash flows.
How do the indicators change over the life of a fund?
The structure of the indicators changes over the course of the fund's life cycle.
During the investment phase
At the beginning of the fund's life:
- the paid-in capital increases;
- the DPI generally remains low;
- NPV accounts for the bulk of the value;
- TVPI s may be less than or close to 1x;
- IRR s can be negative or unstable.
Initial expenses and costs are incurred before companies have had time to create value. This trend can contribute to the J-curve.
During the value creation phase
When companies grow:
- the RVPI may increase;
- TVPI is starting to reflect the price increases;
- The first distributions increase the DPI;
- IRR is gradually becoming more significant.
At this point, a large portion of the performance may still be driven by unrealized gains.
During the divestiture phase
As new releases come out:
- the DPI increases;
- the RVPI is decreasing;
- TVPI s are gradually being converted into realized value;
- IRR 's performance is becoming more stable.
The value is transferred from the NAV to the DPI. A sale made at the net asset value may not change the TVPI, but it improves the quality of this multiple by replacing an estimate with a distribution.
Upon liquidation of the fund
Once all equity interests have been sold:
RVPI=0
The relationship then becomes:
TVPI=DPI
The total multiple is based entirely on actual distributions. The final “ IRR ” no longer depends on an estimated residual value.
How do you compare two private equity funds?
Comparing two funds requires establishing a consistent framework. Simply comparing IRR or TVPI can lead to erroneous conclusions.
Compare Similar Vintages
Investment conditions vary from year to year. Valuations, interest rates, access to debt, and exit opportunities all influence results.
A 2015 fund should not be directly compared to a fund launched in 2023 without taking into account the difference in their maturity.
Compare Similar Strategies
Venture capital, growth equity, and buyouts do not follow the same value creation cycles. The pace of distributions and the failure rate can vary significantly.
The benchmark must therefore correspond to the strategy, the vintage, the geographic region, and, if possible, the size of the fund.
Compare net data with net data
A gross " IRR " should not be compared to a net " IRR ." The same rule applies to multiples.
Cambridge Associates recommends, in particular,examining the net returns to investors—after fees, expenses, and carried interest — to compare fund performance.
Use the Same Valuation Date
The indicators must be calculated as of a comparable date. An additional quarter may include a distribution, a revaluation, or a significant impairment.
The reporting date and the frequency of the evaluations must therefore be verified.
Examine the impact of credit lines
Some management companies use underwriting credit lines to temporarily finance investments before calling on investors' capital.
By delaying redemptions, these mechanisms can artificially shorten the period during which the capital appears to be invested and automatically increase the IRR.
The impact on the multiple is generally less direct, although interest and fees on the line of credit can affect the net worth.
The reporting template published by the ILPA in January 2025 also calls for the presentation of net IRR and TVPI , both with and without the impact of credit lines at the fund level. This distinction enhances the transparency of comparisons.
.webp)
.webp)
