RVPI

What is RVPI?

RVPI stands for residual value to paid-in capital. Invest Europe defines it as the ratio of residual value attributable to limited partners, net of carried interest, to paid-in capital. It is the part of a fund's reported performance still sitting in unsold assets. The GIPS standards call the same measure the unrealized multiple: residual value over since-inception paid-in capital.

The two halves of the ratio

Both halves have precise definitions, and both are more specific than people assume.

Residual value is not simply net asset value. Invest Europe defines it as the remaining undistributed net asset value of the fund after carried interest has been allocated. The GIPS standards define it as the remaining equity that limited partners or investors have in an investment vehicle at the end of the performance reporting period. Both definitions put the investor, not the fund, at the center: what is left for the limited partners once the manager's share is taken out.

Paid-in capital is cumulative drawn capital, not commitments. Invest Europe defines it as cumulative payments called by the manager in accordance with the fund formation documents, net of commitments drawn and returned in relation to temporary, bridging or aborted investments, and excluding amounts clawed back, and notes the consequence directly: paid-in capital can exceed commitment. The GIPS definition adds the recycling point, describing paid-in capital as capital inflows to the fund including committed capital drawn down through capital calls and distributions that are subsequently recalled and reinvested.

That second point is where most errors start. Paid-in capital includes everything the manager called, which means it includes the capital called to pay management fees and fund expenses, not only the capital that bought assets. A fund that calls fees from investors therefore carries a larger denominator than a naive model assumes, and every one of the three multiples is correspondingly lower.

How RVPI relates to DPI and TVPI

The identity is stated outright. Invest Europe defines total value to paid-in capital as the sum of distributions to paid-in capital and residual value to paid-in capital, and writes it as TVPI = DPI + RVPI. DPI is the ratio of cumulative distributions to limited partners to paid-in capital.

So the three multiples split one number. TVPI is the whole of what a fund claims to have produced per dollar called; DPI is the part that has been paid out in cash; RVPI is the part that has not. Invest Europe describes the behavior across a fund's life plainly: RVPI typically changes at every reporting period owing to changes in the fair value of the underlying investments, but the ratio becomes lower as investments are realized and ultimately goes to zero at the end of a fund's life.

That terminal condition is the most useful fact about the metric. A fund at the end of its life has an RVPI of zero by construction, so RVPI is a statement about how much of the story is unfinished.

A worked example

Take a fund that has called $80,000,000, has distributed $40,000,000 to its limited partners, and carries a residual value, net of carried interest, of $100,000,000.

• DPI: $40,000,000 / $80,000,000 = 0.5
• RVPI: $100,000,000 / $80,000,000 = 1.25
• TVPI by the identity: 0.5 + 1.25 = 1.75

Check TVPI independently rather than trusting the addition. Total value is residual value plus distributions, which the GIPS standards state as the definition: $40,000,000 + $100,000,000 = $140,000,000. Divided by paid-in capital, $140,000,000 / $80,000,000 = 1.75. The two routes agree.

Now run a realization through it, because that is what reveals what the metric does. Suppose the fund sells a position carried at exactly $60,000,000 and distributes the proceeds. Distributions become $100,000,000, residual value becomes $40,000,000, paid-in capital is unchanged.

• DPI: $100,000,000 / $80,000,000 = 1.25
• RVPI: $40,000,000 / $80,000,000 = 0.5
• TVPI: 1.25 + 0.5 = 1.75

TVPI did not move. The exit converted 0.75 turns of paper value into cash at exactly the carried mark, which is the whole point: an exit at carrying value shifts value from RVPI to DPI and leaves the total alone. Figures here are hypothetical; the definitions and the identity are from the cited guidelines.

Why the mark is the weak point

RVPI inherits every judgment in the valuation. The IPEV guidelines give the standard: fair value is defined by United States and international accounting standards as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, citing IFRS 13 paragraph 9 and ASC Topic 820-10-15-5.

The guidelines also explain why residual value is stated net of the manager's share. Proceeds from a hypothetical realization at fair value would flow through to the investor in an amount equal to fair value less a deduction for incentive payments and carried interest due to the fund manager based on those hypothetical realizations, so net asset value, derived as the fair value of underlying investments and adjusted for incentive payments, provides the best indication of the cash flows an investor would receive at the measurement date.

Invest Europe adds the reporting requirement that follows: TVPI at the fund level should be disclosed on a net of fees and carry basis, and appropriate provision should be made for the deduction of carried interest calculated on the basis of the assets being realized at the carrying value.

Is anyone required to report it?

Under a performance standard, yes. The GIPS standards for firms require that if portfolios in a composite have committed capital, the firm must present, as of the most recent annual period end, since-inception paid-in capital, since-inception distributions, cumulative committed capital, TVPI as the investment multiple, DPI as the realization multiple, the PIC multiple, and residual value to since-inception paid-in capital as the unrealized multiple. RVPI is on that mandatory list.

Under United States securities law, no. The Securities and Exchange Commission adopted a quarterly statement rule that would have required private fund advisers to prepare and distribute quarterly statements disclosing fund-level information about performance, adviser compensation and other fund fees and expenses. The Fifth Circuit struck it down. Its opinion, filed June 5, 2024 in National Association of Private Fund Managers v. SEC, No. 23-60471, concludes that it vacates the final rule. So there is no securities-law mandate to report RVPI to investors; the obligation is contractual and, for firms claiming compliance, a performance-standards one.

Common mistakes

• Using committed capital as the denominator. Paid-in capital is what was actually called, and Invest Europe notes it can exceed commitment.
• Forgetting that paid-in capital includes called management fees and expenses, which makes all three multiples lower than a model built only on invested cost.
• Comparing an RVPI stated gross of carried interest to one stated net. Invest Europe's definition is explicitly net of carried interest, and Invest Europe's guidance is that fund-level TVPI be disclosed net of fees and carry.
• Treating a high RVPI as a good sign on its own. It says the value is unproven, not that it is large.
• Reading a falling RVPI as deterioration. At an exit struck at the carrying value, RVPI falls by exactly the amount DPI rises and TVPI does not move.
• Comparing RVPI across vintages without adjusting for fund age, since the metric is designed to decline to zero over a fund's life.

How it relates to adjacent terms

DPI is the other half of the split, and the pair is the only honest way to read a headline multiple. Two funds at a TVPI of 2.0x, one with a DPI of 1.8x and the other with a DPI of 0.2x, are making very different claims about what they have proven.

TVPI is the sum, and the identity is worth holding in mind whenever a manager presents one number. If you know TVPI and DPI, RVPI is not a separate disclosure; it is arithmetic.

Fair value is the input RVPI depends on entirely, which is why the IPEV guidelines and the accounting standards they cite are the real subject when a limited partner questions a mark. Discounting a manager's RVPI is, in substance, disagreeing with its fair value measurement.