PEINVEST
Calculate the Internal Rate of Return for private equity investments. Enter cash flows (negative for investments, positive for distributions) to compute annualized returns.
IRR is calculated using Newton's method. Enter negative values for capital deployed and positive values for distributions received. The calculator assumes annual compounding.
Internal Rate of Return (IRR) is the annualized rate of return that makes the net present value (NPV) of all cash flows equal to zero. Unlike MOIC, IRR accounts for the timing of cash flows, making it the standard metric for comparing PE fund performance across different fund vintages and hold periods.
Top-quartile PE funds typically target gross IRRs of 20-30%. Net IRRs (after fees and carry) for strong funds range from 15-25%. Venture capital can achieve higher IRRs (30%+) but with more dispersion. Buyout funds targeting 2-3x MOIC over 5-7 years aim for roughly 15-25% gross IRR.
IRR measures annualized return accounting for time value of money, while MOIC (Multiple on Invested Capital) measures total return regardless of timing. A 2x MOIC over 3 years implies ~26% IRR, but 2x over 7 years implies only ~10% IRR. Both metrics together provide a complete picture.
IRR can be inflated by early small distributions, subscription line financing (which delays capital calls), or short holding periods. A fund returning $1.5M on $1M in 6 months shows 200%+ IRR despite a modest 1.5x multiple. Always evaluate IRR alongside MOIC, DPI, and TVPI.
Our calculator uses Newton's method, an iterative numerical approach that converges on the discount rate where NPV equals zero. Enter investment amounts as negative cash flows and distributions as positive. The algorithm runs up to 1,000 iterations for precision.