IRR
Internal Rate of Return. The annualized rate that makes the net present value of a fund's or deal's cash flows equal to zero. It is the most common way PE performance is expressed, because it captures the timing of cash in and out. A higher IRR means the capital was worked harder per year.
Example
A fund that returns 1.5x MOIC over five years has a lower IRR than one that returns 1.5x over three years.
Related terms
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