§ 01
MOIC = Exit Equity / Invested Equity
§ 02
| MOIC | 3-Year IRR | 5-Year IRR | 7-Year IRR |
|---|---|---|---|
| 2.0x | 26% | 15% | 10% |
| 2.5x | 36% | 20% | 14% |
| 3.0x | 44% | 25% | 17% |
§ 03
A 2.0x MOIC in 3 years is a 26% IRR. The same 2.0x in 7 years is only 10% IRR. Time is the PE investor’s enemy — the longer you hold, the harder it is to achieve target returns.
§ 04
Use the calculator to see how hold period affects IRR. A 3.0x MOIC in 5 years is 25% IRR — but in 7 years it drops to 17%. This is why PE firms are eager to exit.
§ 05
A PE fund reports 2.5x MOIC. Is this good performance?
§ 06
§ 07
PE fund targets 20% IRR with a 5-year hold. A deal projects 15% IRR on base case. Do they still do the deal?
Five questions · AI feedback
Sit with the ideas.
A PE fund invests $500M of equity in a deal. After 4 years, the fund receives $200M via a dividend recapitalization and then sells the company for $1.1B in equity value at exit. What are the gross MOIC and approximate IRR?
Why: