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...
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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.
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