TVPI

How TVPI works

TVPI answers one question: for every dollar an investor has put into a fund, how many dollars of value exist today, counting both cash already returned and the fund's current estimate of what it still holds.

TVPI = (cumulative distributions + residual value) / paid-in capital

Cambridge Associates groups TVPI with DPI and RVPI as realization ratios and defines it as the residual value plus distributions received to date relative to contributed capital. The Institutional Limited Partners Association gives the same construction in its private equity glossary: the current value of remaining investments within a fund, plus the total value of all distributions to date, relative to the total amount of capital paid into the fund to date.

The identity that follows is the reason TVPI is never read alone:

TVPI = DPI + RVPI

DPI is the cash half, distributions over paid-in capital. RVPI is the paper half, residual value over paid-in capital. A 1.8x TVPI made of 1.6x DPI and 0.2x RVPI is a fund that has already delivered. A 1.8x TVPI made of 0.2x DPI and 1.6x RVPI is a fund that has delivered an opinion. The number is identical; the claim is not.

Three conventions change the answer and should be stated whenever the number is quoted.

Gross or net. Gross TVPI measures investment performance before fund-level costs. Net TVPI is what the limited partner actually experiences, after management fees, fund expenses and carried interest. Cambridge Associates describes its fund-level returns as reflecting what limited partners earn after management fees and carried interest, while company-level returns are gross. The gap between the two is structural and large; comparing one fund's gross TVPI to another's net TVPI is meaningless.

What sits in the denominator. Paid-in capital normally means capital actually contributed by limited partners, not capital committed. Contributions used to pay management fees and organizational expenses count. There is a stated convention for recallable distributions: ILPA's glossary points to the GIPS standards, under which recallable distributions belong in the numerator and reinvested capital resulting from them belongs in the denominator. Administrators do not all follow it, and whether a redrawn dollar is counted once or twice moves the ratio.

How residual value is struck. Residual value is net asset value, which for private holdings is a fair value estimate produced by the manager and reviewed by the auditor. Cambridge Associates defines net asset value as the current value of an investment held by private investment managers, the equivalent of market value for a marketable security. It is an estimate, and every unrealized dollar in a TVPI inherits that estimate's uncertainty.

TVPI also has no time in it. A 2.0x TVPI reached in four years and a 2.0x TVPI reached in eleven are the same multiple and wildly different investments, which is why TVPI travels with an IRR.

Worked example

Suppose a 2019-vintage venture fund with 100 million dollars of limited partner commitments. All figures are hypothetical.

As of the most recent quarter end, the fund has called 82 million dollars, has distributed 45 million dollars in cash and stock, and reports remaining net asset value of 96 million dollars across eleven portfolio companies.

Step one: total value. Distributions of 45 million plus residual value of 96 million equals 141 million dollars.

Step two: the ratio. 141 million divided by 82 million paid in equals 1.72x TVPI.

Step three: decompose it. DPI is 45 / 82 = 0.55x. RVPI is 96 / 82 = 1.17x. They sum to 1.72x, as they must.

Step four: read it. The fund has returned 55 cents on the dollar in cash. Two thirds of the reported value is still unrealized and marked by the manager. If the portfolio were written down 25 percent, residual value falls to 72 million, total value falls to 117 million, and TVPI falls from 1.72x to 1.43x without a single thing happening in any portfolio company except a change in estimate.

Step five: check the gross-to-net gap. If this 1.72x is a gross number at the investment level, the net-to-limited-partner figure is lower by the management fees and expenses charged over six years and by any accrued carry. Where a firm advertises a figure as performance, the Securities and Exchange Commission's marketing rule requires net to be shown with at least equal prominence alongside gross. Whether a multiple such as TVPI is itself performance is a question the staff has expressly declined to answer, so the conservative practice is to show both.

Where it shows up

In the quarterly report package, TVPI appears in the fund performance summary alongside DPI, RVPI and since-inception IRR, both gross and net. The ILPA Reporting Template standardizes that presentation, and the newer ILPA Performance Template goes further by fixing the methodology for capturing performance metrics and the corresponding contributions and distributions, so that two managers computing the same metric compute it the same way.

In the capital account statement, TVPI appears at the individual limited partner level rather than the fund level. That number can differ from the fund's, because an investor who closed in a later closing has a different contribution schedule and a different fee history.

In the private placement memorandum and the fundraising track record page, TVPI is the headline multiple for prior funds, presented by vintage year. Under the marketing rule, an adviser presenting gross performance must present net performance over the same period, using the same return type and methodology, with equal prominence and in a format that allows comparison.

In the limited partnership agreement, TVPI itself is usually not a defined term, but the inputs are: what counts as a distribution, what counts as a capital contribution, whether distributions are recallable, and how fair value is determined. Those definitions are what an LP should read before accepting a manager's multiple.

In the annual audited financial statements, the residual value that feeds RVPI and therefore TVPI is the fair value the auditor has tested. Cambridge Associates builds its benchmarks from exactly these documents, sourcing data from quarterly unaudited and annual audited partnership financial statements provided by managers.

Common mistakes

• Quoting TVPI without DPI. The split between realized and unrealized is the information; the sum hides it.
• Comparing gross to net. Fee and carry drag between the two is large enough to reverse a ranking.
• Comparing across vintage years. Cambridge Associates treats vintage-year peer groups as the unit of comparison precisely because market conditions at entry dominate early multiples.
• Treating TVPI as a return. It is a multiple with no time dimension. Two funds at 1.7x, one six years old and one twelve, are not equivalent.
• Reading an early-life TVPI as signal. In the first years the ratio is mostly fees against unmarked-up holdings, which is the J-curve, and it says almost nothing about where the fund lands.
• Ignoring what happened to the denominator. A fund that recycled distributions and called that capital again may show a different paid-in figure than an investor expects, changing every ratio built on it.
• Accepting marks without asking how they were struck. Residual value is an estimate, and TVPI is only as good as the valuation policy behind it.

Related terms

TVPI is the sum of DPI and RVPI, and the three are read together with IRR, which supplies the timing TVPI lacks. MOIC is the closely related multiple usually computed at the investment level rather than net to the fund. Early-life TVPI behaves according to the J-curve, and any comparison between funds should be held within a vintage year. The people who receive these numbers are limited partners; the people who compute them are the general partner and the administrator, with carried interest and the management fee explaining most of the gap between gross and net.

Frequently asked questions

What is the TVPI formula?

TVPI equals cumulative distributions plus residual value, divided by paid-in capital. Residual value is the fund's reported net asset value for what it still holds. Equivalently, TVPI is DPI plus RVPI. Always state whether the figure is gross of fees and carry or net to limited partners, and whether paid-in capital includes recallable amounts drawn more than once.

What is a good TVPI?

There is no universal threshold, and any single number quoted without a peer group is close to meaningless. The comparison that carries information is against funds of the same strategy and the same vintage year, using the quartile breaks published by benchmark providers such as Cambridge Associates. A given multiple can be top quartile in one vintage and below median in another.

What is the difference between TVPI and MOIC?

Both are multiples of invested capital and the arithmetic is similar. In practice TVPI is used at the fund level, net to limited partners, with paid-in capital as the denominator, while MOIC is more often used at the individual investment level and gross of fund fees and carry. The Securities and Exchange Commission's staff has declined to say whether either is performance for purposes of the marketing rule, which is a reason to present net alongside gross rather than a reason not to.

What is the difference between TVPI and DPI?

DPI counts only cash and securities actually distributed to investors. TVPI counts those distributions plus the manager's estimate of what remains. TVPI is always greater than or equal to DPI, and the difference between them, RVPI, is the portion of reported performance that has not been converted into anything an investor can spend.

Can TVPI go down?

Yes. Distributions can never be undone, but residual value can be written down at any quarter end, and a markdown reduces TVPI immediately. A fund that reported 2.1x in one quarter and 1.6x two quarters later has not returned less cash; it has revalued what it still owns.

Is TVPI reported gross or net?

Both are reported, and the label matters more than the number. Cambridge Associates describes vintage-year fund-level returns as net of fees, expenses and carried interest, and reserves gross figures for company-level analysis. When an adviser advertises performance, the marketing rule requires that any gross presentation be accompanied by net over the same period with equal prominence.