MOIC / TVPI / DPI / RVPI

In Lesson 1, we saw that IRR is powerful but can be misleading, especially when subscription lines, timing manipulation, or unrealized marks are involved. Multiple-based metrics solve this problem by answering a simpler, more concrete question: How much money went in, and how much came back (or is expected to come back)?

The four metrics in this lesson, MOIC, TVPI, DPI, and RVPI, are the backbone of LP reporting and fund evaluation. They are harder to manipulate than IRR, easier to understand, and when combined with IRR, they provide a complete picture of fund performance. Every quarterly LP report, every fund pitch deck, and every benchmark database reports these numbers alongside IRR.

MOIC: Multiple on Invested Capital

MOIC is the most intuitive performance metric in PE. It tells you how many times the fund multiplied its investors' money. Invested $100M and got back $250M? That is a 2.5x MOIC.

MOIC can be calculated at the deal level (how did a specific investment perform?) or at the fund level (how did the entire fund perform?). At the deal level, MOIC is total proceeds from the investment divided by total equity invested. At the fund level, MOIC is total value (distributions plus remaining portfolio value) divided by total capital invested by LPs.

Like IRR, MOIC comes in gross and net flavors. Gross MOIC measures investment performance before fees and carry. Net MOIC measures what LPs actually received after all costs. Buyout funds typically target gross MOICs of 2.0-3.0x, which translates to net MOICs of roughly 1.6-2.4x after fees and carry.

The critical limitation of MOIC is that it ignores time. A 2.5x in 3 years is spectacular. A 2.5x in 12 years is mediocre. That is why you always pair MOIC with IRR.

TVPI: Total Value to Paid-In

TVPI is functionally equivalent to net MOIC at the fund level. It is the ratio of the fund's total value (distributions plus net asset value of remaining holdings) to the total capital LPs have actually paid in.

The terminology can be confusing because TVPI and MOIC often produce the same number. The distinction is subtle: TVPI specifically uses 'paid-in capital' (the amount LPs have actually wired to the fund) as the denominator, while MOIC can use 'invested capital' (the amount deployed into deals, which may differ from paid-in capital due to fees and expenses being funded from LP contributions). In practice, industry practitioners often use the terms interchangeably, but in formal reporting, TVPI is the standard fund-level metric.

TVPI is the sum of DPI and RVPI. This decomposition is the real analytical power of the framework, because it tells you how much of the fund's reported value is actual cash in hand versus unrealized estimates.

DPI: Distributions to Paid-In

DPI is the most conservative and arguably the most important of the four metrics. It measures only actual cash returned to LPs relative to what they paid in. No estimates, no unrealized marks, no assumptions about future exits. Just real money back.

A DPI of 1.0x means LPs have gotten their money back. Anything above 1.0x is profit. A DPI of 0.5x means only half of invested capital has been returned so far.

DPI is sometimes called the 'realization ratio' or 'cash-on-cash return.' It is the metric that matters most for funds in their later years (vintage years 5+), because by that point, a fund should be exiting investments and returning cash. A fund that is 8 years old with a high TVPI but low DPI is a red flag: it means the GP is reporting high paper values but has not actually turned those values into cash distributions. Experienced LPs have a saying: 'You cannot eat TVPI.' DPI is the metric that pays pensions.

RVPI: Residual Value to Paid-In

RVPI measures the unrealized portion of the fund's value. It is the estimated fair market value of the fund's remaining portfolio companies divided by total paid-in capital.

For a young fund in its deployment phase, RVPI will be high because the fund has made investments but not yet exited them. For a mature fund nearing wind-down, RVPI should be low because most investments should have been sold. A high RVPI on an old fund signals that the GP is struggling to exit positions, a situation known as being 'long in the tooth.'

RVPI is inherently subjective. The Net Asset Value used in the numerator is the GP's estimate of what portfolio companies are worth. These estimates are based on comparable public company multiples, recent transaction comps, and other methodologies prescribed by fair value accounting standards (ASC 820 in the US). GPs have some discretion in these valuations, and studies have shown that GPs tend to mark up valuations when fundraising for a new fund. This does not mean RVPI is useless, but LPs should apply appropriate skepticism, especially when RVPI constitutes a large share of TVPI.

Why DPI Matters More as Funds Age

In the early years of a fund's life (years 1-4), RVPI dominates TVPI because the GP is deploying capital and has not yet exited any investments. A low DPI at this stage is expected and is not a concern.

By years 5-7, the fund should be entering its harvesting phase. Exits should be occurring, and DPI should be climbing. If DPI is still below 0.5x at year 6, it may indicate that the GP is struggling to find exits, that portfolio companies are not performing as expected, or that the GP is holding investments too long hoping for a better outcome.

By years 8-10, sophisticated LPs focus almost exclusively on DPI. A fund claiming a 1.8x TVPI at year 9 with a 0.4x DPI has a major credibility problem: 78% of its reported value is unrealized. Either the exits are imminent and the GP has been patient for good reason, or those marks are overstated.

The endowment and pension fund community has become increasingly DPI-focused after the 2008 financial crisis, when many funds that reported strong TVPIs saw their unrealized values collapse. The lesson was painful: unrealized gains are not real until they are distributed.

MOIC, TVPI, DPI, and RVPI form the multiple-based toolkit that every PE professional uses daily. Together with IRR, they provide a comprehensive view of fund performance. The golden rule for LP analysis: lead with DPI for mature funds, use TVPI as a forward indicator for younger funds, and always pair multiples with IRR to get the full picture. In the next lesson, we will explore the J-curve effect, which explains why all of these metrics look terrible in a fund's early years and why that is entirely expected.