Fund metrics: four numbers that tell the story
Four standard metrics come from the fund's cash flows: DPI (distributions ÷ paid-in — what has actually come back), RVPI (NAV ÷ paid-in — what remains unrealized), TVPI = DPI + RVPI (the total multiple), and XIRR (annualized IRR of irregular flows). The reading rule: a young fund with high TVPI and zero DPI is all paper; a mature fund with high DPI has converted to cash. To compare against public markets, KS-PME and PME+ benchmark the fund against 'the same money in an index' — KS > 1 (or fund IRR > PME+) means excess performance.
Fees: waterfalls and their traps
The standard LP waterfall has four steps: return of capital, preferred return (e.g., 8% compounded), GP catch-up (until the GP holds the carry share of distributed profits), and the 80/20 residual split. Deal-by-deal (American) waterfalls run the four steps per deal and cap cumulative GP compensation with a clawback at carry × whole-fund profit. In hedge funds, performance fees are disciplined by the high-water mark: no incentive fee until NAV exceeds its prior peak.
Worked example: a complete European waterfall
- Paid-in 100; single distribution of 200 after one year; hurdle 8%, catch-up 100%, carry 20%.
- Step 1: 100 returned to LP. Step 2: preferred = 8 to LP.
- Step 3: catch-up length W solves GP = 20% × (8 + W) → W = 2, all to GP.
- Step 4: residual 90 → GP 18, LP 72.
- GP total = 20 = 20% × profit of 100 ✓ — the complete-waterfall identity.
نتیجه: With sufficient distributions the GP earns exactly carry × profit; with smaller distributions the GP falls short of the target share — the 'effective GP share' the platform reports explicitly.
Young-fund IRR is structurally flattering (timing of flows), and reported volatility is smoothed by periodic valuations. Never read a metric alone: pair IRR with TVPI and PME+, and Sharpe with Sortino and Max Drawdown.