hard · Private Equity & LBOs

Which statement most accurately captures the limitation of comparing these funds on IRR versus MOIC, given the same MOIC?

1. Fund A has the higher IRR because a 2.0x in 3 years annualizes to roughly $26% versus roughly $10% for 7 years, but IRR alone can flatter a manager who returned capital quickly into a low-reinvestment-rate environment, so MOIC-plus-IRR with a PME benchmark is needed to judge skill.
2. Fund A and Fund B have identical IRRs because MOIC is equal; the holding period does not affect IRR when the multiple is held constant across the two funds.
3. Fund B has the higher IRR because a longer compounding period on the same multiple produces more annualized return, making the slower exit the superior outcome.
4. Fund A has the higher MOIC-adjusted IRR, and since IRR already embeds the reinvestment assumption at the cost of capital, no PME or benchmark comparison adds information beyond the two metrics.

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