PEINVEST
The year in which a PE fund makes its first investment or holds its initial closing. Vintage year is critical for benchmarking because macroeconomic conditions at the time of deployment significantly influence fund returns.
The characteristic pattern of PE fund returns over time, where early years show negative returns due to management fees, fund expenses, and unrealized losses on new investments, before inflecting upward as portfolio companies mature and are exited. The shape of cumulative returns resembles the letter J.
The annualized rate of return that equates the present value of all cash inflows with the present value of all cash outflows in an investment. IRR is the most widely used return metric in PE and accounts for the timing and magnitude of cash flows.
The total duration of a PE fund from initial close to final liquidation, typically 10-12 years with possible extensions. The fund life encompasses the investment period, holding period, and exit/harvest period during which all portfolio investments are realized.