--- title: "Gross IRR | Altss Glossary" description: "Gross IRR is the money-weighted annual return on a fund's portfolio investments, computed from the dated cash invested in and received from holdings…" canonical: "https://altss.com/glossary/gross-irr" --- Glossary · Performance & benchmarking # Gross IRR Also called: gross internal rate of return Gross IRR is the money-weighted annual return on a fund's portfolio investments, computed from the dated cash invested in and received from holdings before management fees, fund-level expenses and the general partner's carried interest. Publisher: Altss LLCContent modified 2026-10-02 ALTSS-PERF-002 Gross IRR measures how well the manager's investment decisions performed, not what investors in the fund earned. It uses the dates and amounts of money going into and coming out of the underlying deals, plus the current value of anything still held. Because fees, expenses and the manager's profit share are not deducted, gross IRR is normally well above the investors' net IRR and, on its own, overstates what an LP received. ## Formula ### Gross IRR (date-exact) ``` 0 = sum over dates of (proceeds − investments) / (1 + gross IRR)^((d_t − d_0)/365) + remaining value / (1 + gross IRR)^((d_T − d_0)/365) ``` `I_t` capital invested in portfolio holdings on date `d_t` (initial cost and follow-ons) `P_t` proceeds received from holdings on date `d_t`: exit proceeds, dividends, interest, recapitalisation proceeds `V_T` fair value of investments still held at the valuation date `d_T` `d_0` date of the first investment There is no single definition of "gross". Commonly it means investment-level cash flows with no deduction for management fees, fund expenses or carried interest. Some managers deduct fund-level expenses, include the cost of fund-level borrowing, or compute gross IRR from fund-level rather than deal-level dates. Compare gross IRRs only when the footnoted basis is the same. Calculator ## Fund cash-flow calculator Enter LP contributions and distributions with their dates and the latest reported NAV. IRR uses the XIRR convention (actual days / 365) and treats NAV as a final inflow on its date. Calculations run in your browser. Cash flow 1DateTypeContributionDistributionAmountRemoveCash flow 2DateTypeContributionDistributionAmountRemoveCash flow 3DateTypeContributionDistributionAmountRemoveCash flow 4DateTypeContributionDistributionAmountRemoveAdd cash flow Reported NAVNAV date Paid-in 15 Distributions 12 IRR (XIRR) 9.03% DPI 0.80x RVPI 0.60x TVPI 1.40x ## What gross IRR excludes and includes Gross IRR is measured before three layers of cost that sit between the portfolio and the LP: [management fees](https://altss.com/glossary/management-fee), fund expenses (organisational costs, administration, audit, legal) and [carried interest](https://altss.com/glossary/carried-interest-carry). It is normally after costs borne inside the portfolio: transaction costs capitalised into the cost of an investment, interest on portfolio-company debt, and the company's own expenses. Transaction or monitoring fees charged to portfolio companies reduce the value of the holdings; whether they are offset against the management fee is a separate question of [fee offsets](https://altss.com/glossary/fee-offset) that affects net, not gross, returns. ## Deal-level and fund-level gross IRR A deal-level gross IRR uses one holding's flows. A fund-level gross IRR is the IRR of all deal flows added together by date. It is not the average of the deal IRRs: a small investment sold quickly at a high IRR barely moves the fund figure, while a large holding dominates it. LPs use deal-level gross IRRs and multiples to study a manager's [track record](https://altss.com/glossary/track-record): the spread of outcomes, the share of capital lost, realised versus unrealised results, and which partner led which deal. ## Subscription lines narrow the reported spread Deal-level flows are dated when the fund invests, even if the investment is first funded by a [subscription line](https://altss.com/glossary/subscription-line). LP flows are dated when capital is called, which can be months later. A facility therefore leaves gross IRR unchanged while raising net IRR, so the gross-to-net spread narrows. Net IRR can even exceed gross IRR for this reason alone. A narrow spread is not, on its own, evidence of low fees. ## Gross IRR in marketing and reporting In the US, the Marketing Rule of the Securities and Exchange Commission (SEC), which applies to advisers registered or required to be registered with the SEC, defines gross performance as results before the deduction of all fees and expenses paid in connection with the adviser's services, and requires any advertisement that shows gross performance to show net performance with at least equal prominence, over the same period and using the same type of return and methodology. SEC staff guidance, posted in February 2024 as an answer to a frequently asked question, adds that if gross IRR excludes the effect of a fund-level subscription line, the net IRR shown beside it has to exclude that effect too. The Global Investment Performance Standards (GIPS) require a firm that claims compliance to label composite returns in its GIPS reports as gross-of-fees or net-of-fees. The Performance Template of the Institutional Limited Partners Association (ILPA), released in 2025, standardises fund-level gross figures under two methods: a Granular method, which classifies capital calls at transaction level and excludes fee and expense calls and carry from gross, and a Gross Up method for managers that do not classify calls that way. Whatever rules apply, a gross figure tells an LP little without its net counterpart and a stated definition. See [gross vs net returns](https://altss.com/glossary/net-vs-gross-returns) for the bridge between the two. ## Worked examples ### Illustrative deal with a dividend recapitalisation ($ millions) A fund invests $40m in a company at year 0, receives a $12m dividend recapitalisation in year 2 and sells its stake for $68m in year 5. Total proceeds are $80m, a gross [MOIC](https://altss.com/glossary/moic) of 2.00x. Gross IRR is **16.9%**. ### Same deal, all proceeds at exit If the full $80m had arrived at the year-5 exit, the multiple would still be 2.00x but gross IRR falls to **14.9%**. The recap moved cash forward; it raised IRR without adding value. ### Fund-level gross IRR from aggregated deal flows ($ millions) A fund invests $100m in year 0 and $50m in year 1, receives $80m of proceeds in year 3 and $120m in year 4, and holds the remaining investments at a fair value of $100m at the end of year 5. Aggregated deal flows are −100, −50, 0, +80, +120, +100. Gross IRR is **20.6%** and gross MOIC 2.00x. The same fund's [net IRR](https://altss.com/glossary/net-irr) to LPs, after $15m of fees and $27m of carry, is 15.2%. Examples are illustrative; figures are not market data. ## Not the same as - [Net IRR](https://altss.com/glossary/net-irr): Net IRR is calculated on LP contributions and distributions after fees, expenses and carry; gross IRR on investment-level flows before them. - [Multiple on Invested Capital (MOIC)](https://altss.com/glossary/moic): Gross MOIC measures the multiple on invested capital with no time dimension; gross IRR is the annualised rate on the same flows. - [Internal Rate of Return (IRR)](https://altss.com/glossary/irr): IRR is the general method; gross IRR is IRR applied to a specific set of investment-level cash flows. ## Common mistakes - Ranking a fund's gross IRR against vintage-year quartiles that are built on net IRRs. - Computing a fund's gross IRR as the average of its deal IRRs instead of the IRR of the aggregated deal flows. - Assuming every manager defines gross the same way; check whether fund expenses or fund-level borrowing costs are deducted. - Reading a narrow gross-to-net spread as evidence of low fees when the fund uses a subscription line. - Presenting gross IRR without net IRR in an advertisement of an SEC-registered adviser, which the Marketing Rule prohibits. ## Edge cases - A deal sold within a few months of purchase can show a very large gross IRR on a small gain; weight deal IRRs by capital before drawing conclusions. - Deals denominated in another currency produce different gross IRRs in local currency and in fund currency; the reporting currency must be stated. - Recycled proceeds reinvested in new deals appear as both proceeds and new investments in the deal-level series. ## Questions ### Can net IRR be higher than gross IRR? Yes, occasionally. If a subscription line delays capital calls, LP money is at work for a shorter time than the deal-level flows imply, which can lift net IRR above gross IRR. Net multiples still stay below gross multiples because fees and carry are real costs. ### Why do managers report gross IRR at all? It isolates investment selection and value creation from fund economics, and deal-level gross figures are the only way to compare individual investments. It must be read next to net IRR. ## External standards | Standard | Relation | Note | | --- | --- | --- | | SEC Marketing Rule (Advisers Act Rule 206(4)-1) (Rule 206(4)-1(e)(7) definition of gross performance; (d)(1) gross must be accompanied by net) | related | | | GIPS 2020 (Gross-of-fees return) | related | | | ILPA Performance Template (2025) (Granular and Gross Up methodologies for fund-level gross performance) | related | | ## Sources - [17 CFR 275.206(4)-1 - Investment adviser marketing (Marketing Rule)](https://www.law.cornell.edu/cfr/text/17/275.206(4)-1). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 2022-04-15 (later versions technical). Status: in force (checked 2026-10-01). 17 CFR 275.206(4)-1 introductory text; (d)(1)(i)-(ii); (e)(7) gross performance; (e)(10) net performance — supports: Gross performance definition; gross must be shown with net at equal prominence, same period, same type of return and methodology - [Marketing Compliance - Frequently Asked Questions](https://www.sec.gov/rules-regulations/staff-guidance/division-investment-management-frequently-asked-questions/marketing-compliance-frequently-asked-questions). U.S. Securities and Exchange Commission, Division of Investment Management (staff), Last updated 2026-01-15. Status: current (staff views, not rules) (checked 2026-10-01). FAQ posted 2024-02-06 — supports: Gross and net IRR must be on the same subscription-facility basis - [ILPA Performance Template (Granular Methodology and Gross Up Methodology), v1.1](https://ilpa.org/industry-guidance/templates-standards-model-documents/ilpa-templates-hub/ilpa-performance-template/). Institutional Limited Partners Association, ILPA, Released January 2025 (QRSI); v1.1 April 2025. Status: Current; for funds commencing operations on or after 1 January 2026 (checked 2026-10-01). Granular Methodology guidance v1.1, p. 10 and section VII (p. 20) — supports: Two standardised methods for fund-level gross performance - [Enhancing Transparency Around Subscription Lines of Credit](https://ilpa.org/resources-tools/resource-library/enhancing-transparency-around-subscription-lines-of-credit/). Institutional Limited Partners Association, ILPA, June 2020 (follows the June 2017 guidance Subscription Lines of Credit and Alignment of Interests). Status: Current (checked 2026-10-01). p. 4 (effect of subscription lines on IRR and TVPI) — supports: Subscription lines raise IRR and lower TVPI, distorting reported performance - [Global Investment Performance Standards (GIPS) for Firms 2020](https://www.gipsstandards.org/wp-content/uploads/2021/03/2020_gips_standards_firms.pdf). CFA Institute, 2020 edition; effective 1 January 2020; required for GIPS Reports with periods ending on or after 31 December 2020. Status: Current (checked 2026-10-01). Provisions 4.A.3.b and 5.A.5.b — supports: Firms must clearly label whether composite returns are gross-of-fees or net-of-fees ## Related terms 9 terms - [Net IRR](https://altss.com/glossary/net-irr) - [Gross vs Net Returns](https://altss.com/glossary/net-vs-gross-returns) - [Fee Drag](https://altss.com/glossary/fee-drag) - [Multiple on Invested Capital (MOIC)](https://altss.com/glossary/moic) - [XIRR (Date-Exact IRR)](https://altss.com/glossary/xirr) - [Subscription Line of Credit](https://altss.com/glossary/subscription-line) - [Track Record](https://altss.com/glossary/track-record) - [Track Record Attribution](https://altss.com/glossary/gp-track-record-attribution) - [Internal Rate of Return (IRR)](https://altss.com/glossary/irr) ## Referenced by 1 term - [ILPA Reporting Template](https://altss.com/glossary/ilpa-reporting-template) ## Concept record Concept ID ALTSS-PERF-002 Classification Performance & benchmarking Topics Performance & benchmarking Version 2.0.0 Last reviewed 2026-10-02 Structured data [JSON](https://altss.com/reference/concepts/gross-irr.json) Source check Legal and regulatory statements checked against the cited primary sources on 2026-10-02 ([how](https://altss.com/methodology)). General information, not advice. ## Canonical URL https://altss.com/glossary/gross-irr