Explain why private-market results cannot be read like listed-market returns, and compute and interpret the paid-in multiples DPI, RVPI and TVPI and when each is useful
The idea
The GP controls when capital is called and returned, so private funds report money-weighted IRRs and multiples, not time-weighted returns, and comparing them with an index needs a public market equivalent (PME). DPI = cumulative distributions ÷ paid-in capital, the realised cash investors have actually received. RVPI = NAV ÷ paid-in, the unrealised part, which depends on the GP's valuation. TVPI = DPI + RVPI. A fund with 100 paid in, 60 distributed and a NAV of 90 has a DPI of 0.60, an RVPI of 0.90 and a TVPI of 1.50. Early in a fund's life TVPI is mostly RVPI, so rely on DPI as the fund matures. The trap: multiples ignore timing. 1.5× over ten years is far weaker than 1.5× over four.
Formulas
Distributed to paid-in (DPI)
DPI = cumulative distributions ÷ paid-in capital
- cumulative distributions
- cash returned to the limited partners so far
- paid-in capital
- capital called and paid in so far
Realised cash only, so it is the multiple to rely on as a fund matures. A fund with 100 paid in and 60 distributed has a DPI of 0.60.
Residual value to paid-in (RVPI)
RVPI = NAV ÷ paid-in capital
- NAV
- the fund's remaining net asset value
- paid-in capital
- capital called and paid in so far
Unrealised and dependent on the general partner's valuations. Early in a fund's life it makes up most of the TVPI.
Total value to paid-in (TVPI)
TVPI = DPI + RVPI
- DPI
- cumulative distributions ÷ paid-in capital
- RVPI
- NAV ÷ paid-in capital
Multiples ignore timing: 1.5× over four years is far better than 1.5× over ten. Read it alongside the IRR and a public market equivalent.
In the app: 2 practice questions on this outcome, a narrated walkthrough with diagrams, spaced review that brings it back before you forget it.
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