How do you measure private equity returns?

If you buy a listed share, you can see every day what it is worth. Today's price compared with the purchase price gives you the return straight away. Private equity works differently. Money is called in stages, the companies in the fund are not traded daily and proceeds only come back when companies are sold. As a result, the final return is only fixed at the end of the fund term.

To get a good picture in the meantime, investors and fund managers use 3 measures. Each figure answers a different question.

3 amounts form the basis

All the measures are based on 3 amounts. The first is the capital paid in: the part of your commitment that the fund has called through capital calls and that you have actually transferred. This is known as paid-in capital.

The second is the distributions: the money the fund has paid back to you, usually after the sale of a company. The third is the remaining value: the estimated value of the companies the fund still holds. This value is called the net asset value, or NAV.

TVPI: what is it all worth?

TVPI stands for total value to paid-in. It adds up what has already been distributed and what is still in the fund, and divides that by the capital paid in. In the example above, that is (€600,000 + €1,000,000) ÷ €800,000 = 2.00x. So for every euro paid in, there is currently €2 of value.

TVPI is the most widely used figure for tracking how the value of a fund develops. Part of it is an estimate, however. The remaining value is a valuation of companies that have not yet been sold, and the eventual sale price may turn out higher or lower.

DPI: how much have you already received back?

DPI stands for distributions to paid-in. It divides only the distributions by the capital paid in. In the example, that is €600,000 ÷ €800,000 = 0.75x. So you already have three quarters of your investment back in your account.

The difference from TVPI is important. DPI consists only of money that has actually been distributed. There is no estimate left in it. With a DPI of 1.0x, you have your full investment back; anything above that is realised profit.

The part of the TVPI that has not yet been distributed is called RVPI (residual value to paid-in). In the example, that is €1,000,000 ÷ €800,000 = 1.25x. TVPI is always the sum of DPI and RVPI.

In recent years, investors have been paying particular attention to DPI. Company sales were slower to get going, so funds distributed less. According to J.P. Morgan Asset Management, US private equity funds distributed 14% of their value in the 12 months to the fourth quarter of 2025, compared with an average of 24% since 2001.

From paper to distribution

Over the fund term, the balance between DPI and RVPI shifts. In the first few years, the value consists almost entirely of companies that have not yet been sold. As the fund sells companies, value on paper is turned into money in your account. At the end of the fund term, TVPI and DPI are almost the same.

This ties in with the J-curve. In the first few years, the TVPI is often still below 1.0x, because costs are incurred and value creation takes time.

IRR: how quickly did the money grow?

TVPI and DPI say nothing about time. A fund that doubles your money in 3 years has the same TVPI as a fund that takes 7 years to do so. For you as an investor, that does make a difference: money that comes back sooner can be reinvested.

That is what the IRR, the internal rate of return, is for. The IRR is the return per year, taking into account the timing of each payment in and each distribution. In the example below, the same doubling produces 26.0% per year if the money comes back after 3 years, and 10.4% per year if it takes 7 years.

Why the IRR alone is not enough

The IRR is sensitive to timing. A quick sale with a modest profit can produce a high IRR, while little has been earned in euros. If you get €100,000 back as €115,000 after 6 months, you achieve an IRR of over 32%, but you earn €15,000.

A fund can also raise the IRR by first paying for investments temporarily with a loan, known as a subscription line, and only calling the money from investors later. Your money then sits in the fund for a shorter time. The IRR rises, while the result in euros does not increase; the interest on the loan is even deducted from it. That is why ILPA, the international association of institutional investors in private equity funds, asks fund managers to also report the IRR without the effect of such loans.

IRR and TVPI therefore belong together: one figure tells you how fast, the other how much.

Gross or net?

For every figure, check whether it is gross or net. Gross figures relate to the companies in the portfolio, before fees and costs. Net figures show what is left for the investor after the management fee, fund expenses and the fund manager's share of the profits (carried interest). For you as an investor, the net figures are what count.

Compare like with like

A return only means something in comparison. Funds are therefore compared with funds that have the same strategy and the same starting year, the vintage year. A 3-year-old fund with a TVPI of 1.3x may be performing well, while the same figure is disappointing for a 10-year-old fund.

If you want to compare private equity with the stock market, the public market equivalent (PME) is often used. This calculates what the same payments in and distributions would have produced in a stock market index. A PME above 1.0 means that the fund did better than the stock market. This method became widely established after the 2005 study by Kaplan and Schoar.

3 figures, one picture

None of the 3 figures is sufficient on its own. TVPI shows how much value there is, DPI how much of it is already in your account and IRR how quickly it happened. Together, they give a fair picture of how a fund is performing.

• TVPI
  What is it all worth?Distributions plus residual value, divided by the amount paid in.
  Notepartly an estimate
• DPI
  What have I had back?What has been distributed, divided by the amount paid in.
  Notesays nothing about speed
• IRR
  How fast did it go?Return per year, taking into account the timing of every payment and distribution.
  Notesays nothing about size