Internal Rate of Return (IRR) is the annualized return rate that makes the net present value of a series of cash flows equal to zero. For LP investments, IRR captures both the size and timing of distributions — a 2x return in 5 years has a higher IRR than a 2x return in 10 years.
IRR is the dominant performance metric for private equity, venture, and real estate funds — displayed prominently on LP portals alongside complementary metrics like TVPI (total value to paid-in) and DPI (distributions to paid-in). For multi-decade vintage comparisons, IRR is supplemented with money-multiple metrics that are less time-sensitive.