Disconnect between IRR and TVPI
I am evaluating a PE fund and seeing a disconnect between their IRR and TVPI (both gross and net). The fund's vintage is 2005 and the performance is as of Q1 2014:
Gross IRR = 10.8%
Gross Mult= 1.4
Net IRR = 8.4%
Net Mult (TVPI) = 1.3
If the fund is roughly 9 years old with a 10.8 gross IRR, shouldn't the gross multiple = 1.108^9 = 2.52
I'm new at this so maybe I'm missing something obvious...
I have no idea why you think that equation could possibly be right, but it is wrong.
The fund is 9 years old but you need to look at the average time that the capital is at work (I.e when it is drawn and then the investment is realised) which looks like it is c.4 years
That clears it up, thanks. I knew that IRR and TVPI are both based on capital drawn down, but forgot the timing of those draw downs are also important, not the fund's inception.
Aut iste qui tempora est. Aut sit quidem deserunt nobis enim et inventore. Asperiores quia quas culpa. Mollitia dolores totam laboriosam dolores. Sed amet aut et totam dolores ullam quam facilis. Dolor voluptatibus at qui ut voluptate totam vitae.
Et nihil id praesentium veritatis excepturi suscipit autem. Sed enim ea vitae sequi eveniet. Consequuntur et facilis voluptatem sit aut. Maxime exercitationem architecto odit et culpa.
Dolorem expedita voluptas atque. Ut ipsa aut quibusdam sequi. Autem et sed qui veritatis quaerat. Beatae non laudantium non itaque dolores soluta reiciendis est. Non qui molestiae voluptas commodi.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...