Modified IRR — addresses the standard IRR's flawed implicit assumption that interim distributions are reinvested at the IRR itself by explicitly specifying separate finance and reinvestment rates: MIRR = left[(FV(positive CFs at reinvestment rate))/(|PV(negative CFs at finance rate)|)right]^1/n - 1. Reinvestment rate is typically the LP's portfolio cost of capital (~8-10%); finance rate is the LP's borrowing/financing cost. MIRR matters for deals with substantial mid-hold distributions (dividend recaps) — a deal showing 30% IRR with heavy mid-hold dividends might show 22% MIRR at a 10% reinvestment rate, still attractive but more realistic. LP performance reporting historically uses IRR; some sophisticated LPs use MIRR as a supplementary metric.