Glossary · Performance & benchmarking
Net IRR
Also called: net internal rate of return · LP net IRR · net IRR to LPs
Net IRR is the IRR earned by a fund's limited partners on their actual contributions, distributions and remaining capital account value, net of management fees, fund expenses and the general partner's carried interest.
Net IRR is the annualised money-weighted return that investors in the fund actually earned. Every dollar an LP paid in, whether for investments, fees or expenses, counts as a contribution; every dollar received after the manager's carried interest counts as a distribution. For a fund that still holds investments, the LPs' share of net asset value, after the carry the manager would earn if the portfolio were sold at that value, is treated as a final distribution.
Formula
Net IRR to LPs (date-exact)
- Ct
- capital called from LPs on date dt, for investments, management fees and fund expenses
- Dt
- distributions paid to LPs on date dt, after carried interest
- NAVnetT
- LPs' capital account balances at the valuation date, net of accrued carried interest
- d0
- date of the first capital call
Fund-level net IRR is usually computed on the combined flows of the fee-paying LPs, excluding the GP's own commitment and any investors that pay no fees or carry; the ILPA Performance Template guidance asks GPs to state which investors are included. Practice uses the date-exact form (XIRR). Treating NAV as a terminal flow is the standard convention for an unrealised fund.
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.
- Paid-in
- 15
- Distributions
- 12
- IRR (XIRR)
- 9.03%
- DPI
- 0.80x
- RVPI
- 0.60x
- TVPI
- 1.40x
What goes into net IRR
Contributions are all amounts LPs paid to the fund: capital for investments, management fees and fund expenses drawn from commitments. Distributions are what LPs received, after the GP's carried interest; amounts held back in a carry escrow are not LP distributions until released. Distributions in kind are counted at their value on the distribution date. The terminal value is the LPs' share of net asset value after the carry that would be payable if the fund were liquidated at reported values, so an interim net IRR already reflects the accrued carry.
Fund-level and individual LP net IRR
The net IRR in a fund report is an aggregate. An individual LP's own net IRR differs when its economics differ: fee discounts for size or for an early close, side-letter terms, a later admission with equalization payments, or excused investments. Differences also arise from dates (notice date versus the date cash moved) and from whether the LP's own costs are included. When an LP's computation and the manager's disagree, the cash-flow dates and the NAV basis are the first things to reconcile.
Subscription lines
A subscription line lets a fund invest first and call LP capital later. The LP's money is outstanding for a shorter time, so net IRR usually rises, while facility interest and costs slightly reduce net multiples. The Institutional Limited Partners Association (ILPA) recommends that managers show net IRR with and without the facility. The Global Investment Performance Standards (GIPS) 2020 require a firm that claims compliance to present a composite's since-inception money-weighted return both with and without a subscription line, through the most recent annual period end, unless the principal was repaid within 120 days using capital called from investors and none of it funded distributions. In the US, the 2023 private fund adviser rules of the Securities and Exchange Commission (SEC) would have required quarterly statements showing performance for illiquid funds both with and without the effect of fund-level subscription lines; those rules were vacated by the US Court of Appeals for the Fifth Circuit on 5 June 2024, so that quarterly-statement requirement is not in force. Showing with-and-without figures in investor reporting then depends on the limited partnership agreement, side letters and ILPA guidance, on GIPS for firms that claim compliance and, for advertisements of SEC-registered advisers, on the Marketing Rule (see gross IRR).
Reading an interim net IRR
Before a fund is fully realised, net IRR depends on the reported NAV. In the first years it is usually negative or erratic because fees are paid on small amounts of invested capital (the J-curve). Over time the figure becomes less responsive to new information, because the earliest flows already carry most of the weight. Read net IRR with net total value to paid-in (TVPI), distributions to paid-in (DPI), the fund's age and the realised share of value, and compare it only with funds of the same strategy and vintage year.
How LPs use net IRR
Net IRR is the headline figure for quartile ranking against vintage peers, a standard input to manager selection and re-up decisions, and the basis for a portfolio's pooled IRR. Because net IRR is an absolute return, LPs pair it with a public market equivalent to ask whether the same cash flows would have done better in a listed index.
Worked examples
Illustrative fund: LP flows after fees and carry ($ millions)
LPs pay in $103m in year 0 ($100m for investments plus $3m of fees), $53m in year 1 and $3m in year 2 (fees only). Fees of $3m a year continue in years 3 and 4 but are netted from proceeds. LPs receive $77m in year 3 and $100m in year 4 (after $17m of carry), and at the end of year 5 their capital accounts total $90m, net of $10m of accrued carry. Net flows are −103, −53, −3, +77, +100, +90. Net IRR is 15.2%, against a gross IRR of 20.6% on the same fund's deal flows.
The same fund's net multiples
Paid-in capital is $159m, distributions $177m and net NAV $90m, so DPI is 1.11x, residual value to paid-in (RVPI) 0.57x and net TVPI 1.68x, against a gross multiple on invested capital (MOIC) of 2.00x.
Examples are illustrative; figures are not market data.
Not the same as
- Gross IRR: Gross IRR is calculated on deal-level flows before fees, expenses and carry; net IRR on LP flows after them.
- Total Value to Paid-In (TVPI): Net TVPI is the net multiple on paid-in capital with no time dimension; net IRR is the annualised rate on the same flows.
- Pooled IRR: Pooled IRR combines the net cash flows of several funds into one series; net IRR describes one fund.
Common mistakes
- Comparing one LP's own IRR with the fund-level net IRR without adjusting for fee discounts, closing date and side-letter terms.
- Ignoring accrued carried interest in NAV, which overstates the interim net IRR.
- Comparing net IRRs across funds with different subscription-line usage without the "without facility" figure.
- Averaging net IRRs across funds instead of pooling their cash flows.
Edge cases
- Recallable distributions that are later re-called appear as both a distribution and a new contribution; administrators differ on whether to net them.
- If a GP clawback is paid, it is a distribution to LPs on the date paid, years after the original carry.
- A fund with an NAV below paid-in capital in its first quarters can show a very large negative net IRR that carries little information.
Questions
What is a good net IRR?
There is no fixed threshold. A net IRR is judged against funds of the same strategy and vintage year, and against a public market equivalent on the same cash flows; the same number can be top quartile in one vintage and below median in another.
Is net IRR the same for every LP in a fund?
No. The reported figure is an aggregate for the included LPs. Investors with fee discounts, different closing dates or excused investments have their own net IRRs.
External standards
| Standard | Relation | Note |
|---|---|---|
| GIPS 2020 (Since-inception money-weighted return (net-of-fees)) | related | |
| SEC Marketing Rule (Advisers Act Rule 206(4)-1) (Definition of net performance) | related |
Sources
- 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). pp. 5-6: recommendation 1 (quarterly) and annual disclosures, net IRR with and without the use of the facility — supports: Reporting performance with and without the subscription facility
- Global Investment Performance Standards (GIPS) for Firms 2020. 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). Provision 5.A.2 (with and without the subscription line; 120-day exception); 2.A.29.a and 2.A.29.c — supports: SI-MWR with and without the subscription line unless principal repaid within 120 days from called capital and none used for distributions; annualised since-inception MWR; in-kind distributions valued when distributed
- ILPA Performance Template (Granular Methodology and Gross Up Methodology), v1.1. 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, section V (Level of Reporting) — supports: Fund-level net figures are computed on the cumulative fee-paying LPs; GPs state which investor types are included
- Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews (final rule), Release No. IA-6383. U.S. Securities and Exchange Commission, Adopted 2023-08-23. Status: vacated (checked 2026-10-01). First-page vacatur disclaimer; section II.B.2.b (PDF pp. 122, 125-126) — supports: 2023 private fund adviser rules (quarterly statements) were vacated; Vacated quarterly statement rule: illiquid-fund performance with and without fund-level subscription facilities
- National Association of Private Fund Managers v. SEC, No. 23-60471 (5th Cir. June 5, 2024). U.S. Court of Appeals for the Fifth Circuit (via govinfo, USCOURTS collection), Decided 2024-06-05. Status: final (checked 2026-10-01). Decided 2024-06-05 (case details page) — supports: Fifth Circuit vacatur of the private fund adviser rules
- Announcement Regarding the Private Fund Advisers Rules. U.S. Securities and Exchange Commission, 2024-10-31. Status: current (checked 2026-10-01). Announcement of 2024-10-31; list of vacated rules — supports: Scope of the vacated rules, including the quarterly statement rule
- 17 CFR 275.206(4)-1 - Investment adviser marketing (Marketing Rule). 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(e)(10) — supports: Definition of net performance