Portfolio and fund returns are described with TVPI, DPI and IRR. Each answers a different question: total value, cash actually returned, and return per year. Reading them together avoids common misinterpretations.
11 min read · Level 5
I think DPI is the only measure that cannot be revised by anyone's opinion, which is why it deserves more attention than it usually gets. Marks are estimates that tend to be optimistic in good markets, and the gap between TVPI and DPI is a fair measure of how much of a reported return is still a promise.
Three measures, for a portfolio or fund that has invested 50,000,000:
Distributions paid back in cash 60,000,000 Remaining value of holdings (marks) 40,000,000
DPI = distributions / paid-in capital = 60,000,000 / 50,000,000 = 1.2x RVPI = remaining value / paid-in capital = 40,000,000 / 50,000,000 = 0.8x TVPI = DPI + RVPI = 2.0x
DPI is cash that has actually come back. RVPI is an estimate that depends on valuation marks. TVPI combines them.
Time matters. If all capital were invested on day one and 2.0x came back after eight years, the annualised return would be:
2.0^(1/8) - 1 = about 9.1% a year
The same 2.0x in five years: 2.0^(1/5) - 1 = about 14.9% a year.
In practice capital is called and returned over many years, so the true IRR must be calculated from the dates and amounts of each cash flow. Money called later and returned earlier produces a higher IRR for the same multiple.
Because each measure can flatter. A high TVPI with low DPI may be mostly unrealised marks. A high IRR may come from a quick early exit on a small amount of capital. A good multiple over a very long period may be an unremarkable annual return.
Reading all three, with the time period, gives a far more honest picture.
This is educational information, not investment, securities or financial advice. Rules differ by country and change — get advice from a qualified professional in your jurisdiction before acting.
Educational, not personalised financial advice. Nothing in the Investor Academy is a recommendation to buy, sell or hold anything — what is right for you depends on your own circumstances and the rules where you live.
Sources: Institutional Limited Partners Association - Reporting templates; U.S. SEC - Investor.gov
Two funds, both reporting 2.5x TVPI after eight years.
Fund DPI RVPI TVPI Fund X 2.0x 0.5x 2.5x Fund Y 0.4x 2.1x 2.5x
Fund X has returned twice its capital in cash. Fund Y has returned less than half; most of its reported value depends on marks for companies not yet sold. If Fund Y's remaining holdings are eventually sold at 30% below their marks, its RVPI becomes 2.1 x 0.7 = 1.47x and its TVPI falls to 0.4 + 1.47 = 1.87x.
Comparing investments or funds on TVPI or IRR alone, without checking how much has actually been returned in cash and over what period.
Calculate DPI and RVPI, not only TVPI.
Note how many years the multiple took.
Use actual dates and amounts rather than a single multiple.
Recalculate TVPI with unrealised value discounted.
When evaluating a fund's reported performance or your own private portfolio.
Do not judge young funds heavily on these measures; early years typically show low or negative returns because of the J-curve.
After private market valuations and exit activity declined in 2022 and 2023, limited partners and industry commentators increasingly emphasised DPI over TVPI and IRR when evaluating venture and private equity managers, because many reported gains remained unrealised.
Cash returned becomes the focus when exits slow and marks are questioned.
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