Multiple on Invested Capital (MOIC)
Definition
MOIC (Multiple on Invested Capital) measures total value returned relative to total capital invested, expressed as a multiple. It does not account for the time value of money – a fundamental limitation that must be understood before using it.
MOIC = Total Value Returned / Total Capital Invested
Where “total value returned” = cumulative cash distributions + current residual NAV of unrealised holdings (for an in-progress fund). For a fully exited fund, it is simply total cash received.
A MOIC of 2.0× means investors received £2 back for every £1 invested, regardless of how long it took.
Why It Matters
MOIC is intuitive, easy to communicate, and easy to calculate. It is widely reported alongside IRR and gives a direct sense of the absolute quantum of return – something IRR alone cannot convey.
The MOIC/IRR combination is standard in PE performance reporting:
- MOIC answers: “How much money did we make?”
- IRR answers: “How fast did we make it?”
Neither metric alone is sufficient. A fund showing 3× MOIC over 15 years is less impressive than 3× MOIC over 4 years. A fund showing 30% IRR on a tiny fund may have generated less absolute value than a larger fund at 15% IRR.
Gross vs Net MOIC
As with IRR, always establish which basis is being used before making comparisons:
- Gross MOIC – Before management fees, carried interest, and fund expenses. Reflects the GP’s investment decisions in isolation.
- Net MOIC – After all fees, carry, and expenses. What the LP actually receives and the correct basis for evaluating whether a fund justified its cost.
Caution: The reduction from gross to net MOIC varies widely depending on the fee structure, fund size, deployment pace, and whether the fund is above or below the carry threshold. No single percentage reduction applies universally. Do not generalise across funds.
LPs should always compare net MOIC figures between funds. GPs sometimes present gross metrics in marketing materials; net metrics in formal reporting. The difference matters.
MOIC and TVPI: The Same Concept, Different Names
For a fund still in operation, MOIC and TVPI express the same concept. TVPI (Total Value to Paid-In) is simply the market convention for expressing what MOIC means when a fund has both realised distributions and unrealised portfolio value:
TVPI = DPI + RVPI = (Distributions + Residual NAV) / Paid-In Capital
This is mathematically the same as MOIC for an in-progress fund where “total value” includes paper NAV. At full realisation (fund wound down), MOIC = TVPI = DPI.
Worked Example
A PE fund calls £100m from LPs and exits all investments for total proceeds of £230m.
- MOIC = £230m / £100m = 2.3×
- If this happened over 5 years: IRR ≈ 18%
- If this happened over 10 years: IRR ≈ 9%
The MOIC is 2.3× in both cases. This is the key limitation: MOIC is silent on time.
Key Limitations
- MOIC ignores time entirely. A 3× MOIC over 3 years is exceptional; the same multiple over 15 years may barely compensate for the illiquidity accepted.
- Interim MOIC (= TVPI) includes unrealised NAV. The residual portfolio is valued by the GP using estimated methodologies, not market prices. Interim MOIC can be artificially high if valuations are optimistic.
- MOIC does not reflect the effect of fees. Always confirm gross or net basis. The gap between gross and net MOIC is material and fund-specific.
- MOIC does not account for risk. Two funds may both return 2× MOIC but with very different risk profiles (leverage, concentration, sector).
Related Files
Manual Review Notes
- No universal gross-to-net reduction percentage exists. If a predecessor version of this file cited a specific range, that was illustrative and should not be treated as market data.
- The relationship MOIC = TVPI for in-progress funds should be verified against how specific fund reporting systems define their terms, as some administrators use slightly different denominators (committed capital vs paid-in capital).