MOIC vs IRR in Private Equity Returns
MOIC measures how many dollars are returned for each dollar invested. IRR measures the annualized speed of those returns.
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Use MOIC to understand total wealth creation. Use IRR to understand time-adjusted return efficiency.
MOIC is useful for sponsor presentations because it shows absolute multiple of capital.
IRR is useful for comparing deals with different exit timing.
A fast small exit can produce a high IRR but a low MOIC. A slower larger exit can produce a strong MOIC but a lower IRR.
Fast flip vs long hold
A sponsor that invests $100 million and exits for $150 million in one year has a 1.5x MOIC and a high IRR. Another sponsor that exits for $300 million after seven years has a 3.0x MOIC but a lower annualized IRR. Both metrics are needed.
Key Metrics
Common Mistakes
Frequently Asked Questions
Is MOIC the same as equity multiple?
In most private equity contexts, MOIC and equity multiple are used similarly to describe proceeds divided by invested equity.
Why do investors report both?
Together they show both size of return and speed of return.
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