Rate of Return
The percentage gain or loss on invested capital, expressed relative to the 1.00x break-even point rather than as a raw multiple.
◆ Percentage
Cumulative cash and stock returned to LPs to date
Capital LPs have actually paid into the fund
Computed — updates as you type
Rate of return
Awaiting inputs — enter distributions and paid-in capital to plot the arc.
Formula
What it measures
The same underlying performance as net multiple, reframed as a percentage gain or loss relative to break-even (1.00x = 0%) rather than as a raw multiple — a format many LPs find more intuitive to reason about.
Why it matters
Percentages communicate gain/loss more directly than multiples for some audiences — '+80%' reads faster than '1.8x' for anyone doing quick mental comparisons against other percentage-denominated benchmarks like public market indices.
How to read it
A rate of return of +80% means LPs have a net multiple of 1.8x — 80% ahead of their paid-in capital. A rate of return of -25% means a net multiple of 0.75x — LPs have received 75 cents back per dollar paid in so far. This metric does not annualize or account for time value of money; a +80% return over 3 years and the same +80% over 10 years show identically here — use Gross IRR when the holding period matters to the comparison.
What good looks like
Good
Positive and growing rate of return, tracking ahead of relevant public-market or fund benchmarks.
Watch
Rate of return flat near 0% for an extended period.
Bad
Materially negative rate of return with no realistic recovery path in the remaining portfolio.
Watch-outs
- Treating this as an annualized return — it is a point-in-time percentage, not a compounded or time-weighted figure.
- Comparing rate of return across funds with very different holding periods without also checking Gross IRR.
- Reading a negative rate of return as a permanent loss rather than checking unrealized value (RPI) that isn't captured in a distributions-only multiple.
Worked example
Hypothetical
LPs have paid in $20M and received $36M in distributions — a net multiple of 1.8x. Rate of return = (1.8 − 1) × 100 = +80%.
FAQ
Is rate of return the same as IRR?
No — despite both being percentages, IRR annualizes returns to account for how long the capital was invested, while this rate of return is simply the net multiple rescaled as a percentage relative to break-even, with no time dimension.
What does a 0% rate of return mean?
It means a net multiple of exactly 1.00x — LPs have received back exactly what they paid in, no more, no less.
Why would rate of return be negative?
It's negative whenever the net multiple is below 1.00x, meaning distributions to date are less than paid-in capital — common early in a fund's life before realizations begin, or in an underperforming vintage.
Related
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