The return on a semi-liquid fund’s factsheet is almost always a time-weighted NAV return — closed-end private equity funds, by contrast, report a money-weighted IRR. The two measure different things and are not directly comparable: a 20% IRR at a closed-end fund produces the same terminal wealth over ten years as an evergreen at around 11% p.a. (Partners Group 2024, provider source). To examine a track record you need multiples (TVPI/DPI) and an understanding of the IRR pitfalls (subscription lines, timing) — and with evergreens additionally a critical look at seed portfolios, day-1 uplifts from secondaries and the cost base.
The IRR (internal rate of return) is the discount rate at which all the payments into and out of an investment come to a present value of zero. It is money-weighted: how much capital is at work in the fund, and when, helps determine the result. For closed-end funds that is the standard: the manager steers capital calls and distributions, and the measure is meant to reward that timing. The same property leaves it open to attack: an early, large book gain on little capital produces a spectacular IRR that barely wears off later. And with subscription credit lines — borrowing with which the fund pre-finances purchases and delays capital calls — the IRR clock can be shifted: depending on fund age, by anything from a few tenths of a point to almost ten percentage points (Albertus/Denes 2019, working paper; details below). Hence Howard Marks’ famous 2006 Oaktree memo: “You Can’t Eat IRR” — you cannot live off a percentage figure, only off money that has come back. An IRR is not an account balance.
Multiples answer the question the IRR leaves open: how much money did how much money turn into? MOIC (multiple on invested capital) relates total value to invested capital — often gross, that is before fees and carry, at deal level. TVPI (total value to paid-in) is the investor’s view: (distributions + residual value) ÷ capital paid in, ideally net; with every track record, ask whether the figures are gross or net — the difference is substantial. TVPI breaks down into DPI (distributions to paid-in: what has been paid out) and RVPI (residual value to paid-in: what is still carried on the books as a valuation). DPI is the “hard” component; RVPI depends on the manager’s NAV valuation. According to Phalippou (2020), private equity funds have delivered ~1.5x net since 2006 ≈ ~11% p.a. — while paying managers ~US$230 billion in carry (paper). And Hamilton Lane does the arithmetic: 12% p.a. time-weighted produces 2.5x after 8 years — a level only ~6% of closed-end funds reach as a TVPI. An “unspectacular” evergreen can therefore build more terminal wealth than an IRR star.
The time-weighted return (TWR) cuts the investment period into sub-periods at every inflow and outflow, calculates the return of each and chains them geometrically; the timing of investor money drops out. That is the logic of the CFA Institute’s GIPS standards for open-ended vehicles — the manager of a fund open to ongoing subscriptions cannot be blamed for when investors come in and go out. Evergreen and ELTIF factsheets therefore show TWRs like any retail fund; in practice the period return is often approximated using Modified Dietz: (ending value − beginning value − net cash flows) ÷ (beginning value + time-weighted flows), calculated monthly and chained.
A worked example — same fund, two truths. You pay in €100. Year 1 runs strong: +30%, NAV €130. The fund distributes €100; €30 stays invested. Year 2 runs weak: −10%, the €30 becomes €27, which is paid out.
Four structural reasons.
Against closed-end funds: think in terminal wealth, not in IRR. Convert both sides into the same question: what becomes of €100,000 over ten years — including the capital that, in the closed-end fund, sits uncalled or lies idle after distributions? Neuberger Berman has modelled that (an identical net asset return of 13.7%): a series of closed-end funds reaches ~2.7x over ten years, an evergreen with a 15% liquidity buffer ~3.2x, without a buffer ~3.6x — because the capital works immediately and continuously. A provider’s own calculation with favourable assumptions (no redemption effects, equal asset quality), but the direction is consistent with the Partners Group arithmetic. Against ETFs: calibrate the yardstick first. The academic reference is the PME method (public market equivalent): all the fund’s cash flows are notionally invested in an equity index, and the comparison runs over identical payment streams (Long/Nickels 1996; Kaplan/Schoar 2005). The result across >1,800 funds: buyout vintages before 2006 beat the S&P 500 by +3–4% p.a. (PME); from 2006 onwards they were ≈ in line with the market (Harris/Jenkinson/Kaplan 2016, paper). With evergreens the comparison is simpler — TWR against TWR — but costs decide it: according to Morningstar (2026) costs average ~3% p.a., and only a few funds beat their benchmarks after costs. A fair ETF comparison uses the same period, the same region and calculates after all costs — entry charge included.
The subscription-line effect, quantified. Albertus/Denes (2019, working paper) reconstruct from LP cash flows (Burgiss, US buyout, 2014–Q3 2018) what the IRR would have been without fund-level borrowing: funds with subscription lines report an IRR 6.1 percentage points higher (+25% relative to the sample mean). At young funds (vintage 2014 onwards) it is 9.7 points, at older ones only 0.7 — precisely where track records for the next fundraising take shape. Each additional unit of credit leverage adds ~50 basis points. Schillinger/Braun/Cornel (2019, working paper), using a different design, find moderate effects under customary usage but “substantial” increases in time-sensitive measures under extensive usage. The consequence drawn by the ILPA guidance (2020): ask for the IRR with and without the credit-line effect. The line barely affects multiples (interest costs even push them down slightly) — where IRR and TVPI diverge sharply, that is a signal to look closer.
The gross-to-net bridge. Between the gross return of the assets and your factsheet return sit: the management fee (with evergreens on the NAV, not on commitments), the performance fee (often on unrealised NAV gains — a conflict of interest criticised by PitchBook/Wiek), fund and vehicle costs (depositary, administration, and target-fund costs where there are fund-of-funds structures) plus share-class-specific distribution and service fees. Morningstar’s ~3% p.a. total cost ratio means: a portfolio has to run in double digits gross before it can beat an ETF net. The entry charge (with ELTIFs up to several per cent) does not show up in the fund return at all — it reduces your return, not the factsheet’s.
Track record questions for the manager. (1) Return net of all fees of the specific share class? (2) How long has the vehicle existed, and does “since inception” include an incubation phase with a seed portfolio? (3) What share of the return comes from write-ups, in the quarter of purchase, of secondaries bought below NAV? (4) IRR figures from the drawdown history: with or without the subscription-line effect, gross or net? (5) What is the DPI of the predecessor funds cited — not just TVPI/IRR? (6) Who values the NAV, how often, with what lag? (7) Does the same team manage the evergreen and the flagship funds, and how are deals allocated between the two? (8) Which benchmark does the fund measure itself against, and why that one?
The IRR is money-weighted: it depends on how much capital was in the fund and when, and it measures only the return on the capital tied up. The “return p.a.” on ETF and evergreen factsheets is time-weighted and screens cash flows out. A 20% IRR is therefore not 20% growth in wealth per year.
It depends on the context: since 2006 private equity funds have delivered ~1.5x net on average (Phalippou 2020); a TVPI of 2.5x is reached by only ~6% of closed-end funds (Hamilton Lane). The DPI is what counts — money is only earned once it has been distributed; a high TVPI with a low DPI rests on valuations, not on cash.
Partly genuine performance, partly mechanics: early book gains on little capital, subscription credit lines (an effect of up to ~9.7 IRR points at young funds, Albertus/Denes) and the property of the IRR that it locks in early successes permanently. So never read an IRR without a multiple.
Methodologically yes — both report time-weighted returns. It only becomes fair after all costs (avg. ~3% p.a. ongoing costs plus the entry charge), over identical periods and against a suitable benchmark; on top of that, the NAV visually smooths the ELTIF’s swings.
No. A distribution yield is a payment promise, not a performance measure: a fund can distribute while its NAV falls — part of the “return” is then a repayment of capital. What matters is the total return (NAV movement plus distributions).
At least one full market cycle, realistically 5+ years with a stable portfolio. Shorter histories are often distorted by seed portfolios, day-1 uplifts on purchased secondaries and the small base at the start — and a house’s drawdown successes are no reliable substitute (PitchBook 2026).
Last reviewed: 16 Oct 2026 · Methodology · Not investment advice.