How do you calculate net IRR and gross IRR?

So I've seen the cash flows calculated for net IRR in two different ways in PE:

Way 1:

Annual cash flows = Capital called - fees + returns (or NAV) - carried interest (if exit period CF)

Then an XIRR or IRR formula of said cash flows will give you the net IRR


Way 2:

Annual cash flows = Capital called + returns (or NAV)

Then an XIRR or IRR formula of said cash flows will give you the net IRR. Adding the fees (absolute figure) would give you the cash flows for gross IRR


Both are obviously very different and it's extremely confusing. All I want to find is the net IRR of a single-asset fund. Can anyone help me with understanding the right formula? Thank you in advance

 
Most Helpful

Net IRR formula is the same for a single asset fund or multiple assets. If you have access to the cash flows then run XIRR on the numbers below (repeating rows as required)

Date | Capital called

Date | Distributions

Date | NAV

Capital called can be for investment, management fees or partnership expenses.

Carry is typically paid out of distributions (rather than being called).

Make sure you take the NAV inclusive of accrued carry.

 

Quam numquam dignissimos non pariatur quia. Et nihil tenetur ut maiores voluptatem minus. Velit corporis quo id eligendi nostrum est explicabo culpa.

Optio vel quas eum aliquam. Illum veniam quidem quia.

Ullam voluptatum hic deleniti fugit dolorem neque. Quam aliquid numquam sint saepe sunt. Aut earum incidunt alias voluptatem fugiat ut cumque. Ut fugiat aut nihil qui. Sunt voluptatem est eligendi nulla dolorem sint. Minima veritatis delectus quas optio est doloremque ut.

Sit ut adipisci reiciendis dolorem veniam molestiae. Ab necessitatibus eos vel autem eius pariatur quisquam atque. Nulla in consequatur minus aut ullam.

Career Advancement Opportunities

May 2024 Private Equity

  • The Riverside Company 99.5%
  • Blackstone Group 99.0%
  • Warburg Pincus 98.4%
  • KKR (Kohlberg Kravis Roberts) 97.9%
  • Bain Capital 97.4%

Overall Employee Satisfaction

May 2024 Private Equity

  • The Riverside Company 99.5%
  • Blackstone Group 98.9%
  • KKR (Kohlberg Kravis Roberts) 98.4%
  • Ardian 97.9%
  • Bain Capital 97.4%

Professional Growth Opportunities

May 2024 Private Equity

  • The Riverside Company 99.5%
  • Bain Capital 99.0%
  • Blackstone Group 98.4%
  • Warburg Pincus 97.9%
  • Starwood Capital Group 97.4%

Total Avg Compensation

May 2024 Private Equity

  • Principal (9) $653
  • Director/MD (22) $569
  • Vice President (92) $362
  • 3rd+ Year Associate (91) $281
  • 2nd Year Associate (206) $268
  • 1st Year Associate (389) $229
  • 3rd+ Year Analyst (29) $154
  • 2nd Year Analyst (83) $134
  • 1st Year Analyst (246) $122
  • Intern/Summer Associate (32) $82
  • Intern/Summer Analyst (316) $59
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
BankonBanking's picture
BankonBanking
99.0
3
Secyh62's picture
Secyh62
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
CompBanker's picture
CompBanker
98.9
6
GameTheory's picture
GameTheory
98.9
7
kanon's picture
kanon
98.9
8
dosk17's picture
dosk17
98.9
9
Linda Abraham's picture
Linda Abraham
98.8
10
numi's picture
numi
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”