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A fund can raise its reported net IRR and lower its TVPI in the same quarter without changing a single investment. Bridge capital calls with a subscription line and investor money is outstanding for less time, which lifts IRR. The line's interest and fees reduce net value, which pulls TVPI down.
Same portfolio, two different performance stories.
That gap is why allocators disagree about which number to read first. Our answer: read TVPI first for how much value a fund has created, read net IRR second for how quickly it did so, and check DPI before trusting either. The rest of this post explains why, and where each metric misleads.
Both are net of fees, carry and expenses when reported properly, and both lean on the manager’s own marks for the unrealized portion. That shared weakness matters more than either metric’s quirks, and it is why DPI sits next to them in every serious evaluation.
IRR is easy to flatter early. Subscription lines let a fund delay calling capital, which shortens the measured holding period. The lift is largest in the early years and fades as the fund matures. Quick partial exits can produce the same effect without any credit line at all.
TVPI ignores time entirely. Take a single investment that doubles money. Over four years that is roughly a 19% annual return; over twelve years it is roughly 6% (simple arithmetic on one inflow and one outflow). Both show a 2.0x. A manager with a long hold period and a good-looking multiple is exactly the profile TVPI cannot separate from a fast compounder.
Both depend on marks. In a young fund, TVPI is almost entirely residual value, which is the manager's own estimate. A 1.3x TVPI at year three and a 1.3x TVPI that has been mostly returned in cash are different claims on the same number.
Start with TVPI. It is harder to engineer with financing structure, and it answers the question allocators care about most: did the manager return more than was put in? Then read net IRR as a check on speed, and compare it against the with-and-without credit line figure when the manager provides one.
The order shifts with where the fund sits in its life.
VPI is the sum of two parts: DPI (cash already returned) plus RVPI (value still held in the portfolio). Splitting it shows how much of the multiple is proven and how much is a mark. Two funds at 1.6x TVPI are not equivalent if one is 1.1x DPI and the other is 0.2x.
Net IRR needs the same treatment. An allocator comparing two managers will want net IRR with and without the credit line, so both figures sit on the same footing.
Presenting only the levered figure invites the question of what the unlevered number looks like. Answer it before it is asked.
Lead with TVPI and DPI together. Show the multiple and how much of it is cash in the same line. It answers the first two questions an allocator will ask.
Publish net IRR with and without the credit line. Do it before you are asked. It puts your number on the same footing as peers and removes a reason to discount it.
State your marking policy. Explain how unrealized positions are valued and who reviews them, since RVPI is only as credible as that process.
Benchmark by vintage. Compare against funds of the same vintage and strategy, not a blended average. Dakota Marketplace tracks 57,000+ private funds, with verified IRR, TVPI, DPI and RVPI on 14,000+ of them.
Explain the J-curve before the allocator does. If the fund is young and IRR is low or negative, show the expected trajectory and what is driving it.
Dakota Private Markets tracks 57,000+ private funds, with verified IRR, TVPI, and DPI on 14,000+ of them.
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