XIRR (Date-Exact IRR)

Formula

How XIRR is solved

Like IRR, XIRR has no closed-form solution. Spreadsheet and performance systems search numerically for the rate at which the dated flows have a net present value of zero, usually from a starting guess. The series must contain at least one negative and one positive value; otherwise there is no solution and spreadsheets return an error. When the sign of the flows changes more than once, more than one rate can solve the equation, exactly as for IRR.

Conventions that change the answer

Two calculators given "the same" fund can disagree for reasons that have nothing to do with performance:

• Which date. The cash-flow date is when money moved, not the date of the capital call notice or the distribution announcement.
• Day count. Actual/365, Actual/365.25 and Actual/Actual differ slightly over long periods.
• Aggregation. Some datasets record flows only by quarter and assume they occur at quarter-end, which shifts every flow by up to three months.
• Same-day flows. A call and a distribution on the same day should be netted; leaving them separate does not change the root but can confuse sign-change checks.
• Terminal value. Whether the NAV is gross or net of accrued carry, and its exact valuation date.
• Currency. Converting each flow at its own date's exchange rate is not the same as converting the final result.

Periods shorter than a year

XIRR always expresses the result as an annual rate. A fund three months old with a 3% gain shows an XIRR of about 12.6%, a number that says nothing reliable about a full year. The GIPS standards prohibit annualising returns for periods of less than one year; an XIRR for a fund younger than a year should be reported, if at all, as a cumulative return rather than an annual one.

Where XIRR is used

Fund managers compute net IRR and gross IRR on dated cash flows; LPs rebuild them from capital account statements to check reported figures; and the index-adjusted flows used in direct alpha and other public market equivalent methods are also date-exact. Wherever the inputs are dated, the date-exact form is the correct one. For money-weighted returns, the GIPS standards also require daily external cash flows (for periods from 1 January 2020), which is the date-exact calculation described here.

Worked examples

Examples are illustrative; figures are not market data.

Not the same as

• Internal Rate of Return (IRR): IRR is the general concept and the periodic form; XIRR is the same equation with exact dates and an Actual/365 exponent.
• Modified Internal Rate of Return: Modified IRR (MIRR) replaces the implicit reinvestment and financing rates with stated ones; XIRR keeps the IRR assumptions and only changes the timing.

Common mistakes

• Running a periodic IRR function on flows that are not evenly spaced.
• Using capital call notice dates instead of the dates cash actually moved.
• Reporting an XIRR for a period shorter than one year as if it were an annual return.
• Omitting the terminal NAV, which turns an interim IRR into an undefined or meaningless figure.
• Converting flows to another currency at a single exchange rate.

Edge cases

• A very short history with a large gain produces an extreme annualised rate; the cumulative return is more informative.
• Flows with several sign changes (for example, recalled distributions) can produce more than one XIRR.
• If the first flow is positive (for example, an in-kind transfer recorded first), the equation still solves but the sign convention must be checked.

Questions

External standards

Sources

1. 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). 2.A.12; 2.A.29.b — supports: Returns for periods under one year must not be annualised; money-weighted returns use daily external cash flows

• Time-Weighted Return (TWR)
• Direct Alpha
• Capital Account Statement
• Internal Rate of Return (IRR)