Metrics – Section Index
What This Section Covers
These files explain the key metrics used to measure and report performance and risk in alternative investments. These metrics differ materially from public market equivalents. Read this section after Concepts, so that J-curve, waterfall, and NAV mechanics are already familiar.
Files in This Section
| File | Metric | Category |
|---|---|---|
| IRR | Internal Rate of Return | Performance |
| MOIC | Multiple on Invested Capital | Performance |
| TVPI | Total Value to Paid-In | Performance |
| DPI | Distributions to Paid-In | Performance (realised) |
| RVPI | Residual Value to Paid-In | Performance (unrealised) |
| Volatility | Standard Deviation of Returns | Risk |
| Sharpe Ratio | Risk-Adjusted Return | Risk-adjusted performance |
| Public Market Equivalent (PME) | PME | Benchmarking |
Suggested Reading Order
- MOIC — the simplest metric; no time dependency; anchor point for all others
- IRR — the most used metric; time-sensitive; understand its distortions
- DPI — the hardest metric; cash actually received
- RVPI — the softest metric; unrealised and NAV-dependent
- TVPI — the sum: DPI + RVPI = TVPI; see the relationship clearly
- PME — how PE returns compare to a public index alternative
- Sharpe Ratio and Volatility — more relevant to hedge funds; read last
Metric Relationships
TVPI = DPI + RVPI
TVPI = (Distributions + Residual NAV) / Paid-In Capital
DPI = Distributions / Paid-In Capital
RVPI = Residual NAV / Paid-In Capital
IRR and MOIC together give the most complete picture of PE fund performance: MOIC shows how much money was made; IRR shows how quickly.
Most Important Links
- IRR — the dominant reported metric; includes subscription line distortion, gross vs net
- TVPI — the clearest single snapshot of fund performance at any point in time
- DPI — the most important metric for LP cash planning; the only truly “hard” number
- PME — the only metric that answers “was PE worth it vs just buying an index?”
Self-Check Questions
- What is the difference between IRR and MOIC, and when does each tell a better story?
- Why might a fund have a high TVPI but low DPI, and what does that mean for the LP?
- Why is Sharpe Ratio less useful for illiquid alternatives than for hedge funds?
- How does a subscription line facility affect reported IRR?
- If a fund’s PME is less than 1.0, what does that mean in relation to its IRR?
Related Sections
- Concepts — J-curve, NAV, and waterfalls directly affect metric values
- Asset Classes — different asset classes use different primary metrics
- Operations — metrics are calculated and reported through operational processes