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CFA Level I · CFA Level I Exam · Alternative Investment Performance and Returns

Compared with a fund's since-inception IRR, the TVPI multiple is most likely to:

TVPI ignores the timing of cash flows because it simply divides total value, meaning distributions plus residual value, by paid-in capital. IRR discounts flows, so timing affects it. This is why TVPI and IRR are reported together for private equity funds.

  1. Abe affected by the timing of contributions and distributions
  2. Bignore the timing of cash flows between the fund and investorsCorrect
  3. Cdepend on the reinvestment rate assumed for interim distributions

Explanation

TVPI is a ratio of total value to paid-in capital and does not consider when cash flows occurred. IRR is time-weighted by discounting, so timing affects it. A reinvestment-rate assumption relates to IRR criticisms, not to the TVPI calculation.

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