hard · Private Equity pe-core

Which characterization of the subscription line's impact on reported fund performance metrics is correct?

1. It raises the net IRR by shortening the duration LP capital is outstanding, while leaving the net multiple (TVPI) essentially unchanged aside from interest cost
2. It raises both the net IRR and the net multiple proportionally, because borrowed capital amplifies returns on the same underlying equity base across the whole portfolio
3. It lowers the net IRR because the interest expense on the credit line is a direct drag on returns, while simultaneously raising the multiple through added leverage
4. It leaves the net IRR completely unchanged because IRR is inherently timing-agnostic, but it raises the multiple by deferring the timing of capital calls

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