AIF Performance: How to Read IRR, DPI, TVPI and the J-curve

An AIF report does not look like a mutual fund statement. Instead of one return figure, you see capital called, distributions paid, a valuation and four ratios: IRR, DPI, RVPI and TVPI. This guide explains how to read AIF performance in plain language: what each number means, why early figures often look poor, how SEBI benchmarking works and what to ask. The focus is close-ended Category I and II funds; if AIFs are new to you, start with how AIFs compare with mutual funds and PMS.

Why an AIF cannot be judged like a mutual fund

A mutual fund invests your money on day one and publishes a daily NAV, so a one-year or three-year return describes your experience. A close-ended AIF works differently. You sign a commitment, say ₹1 crore, and the manager calls that money in instalments as it finds investments. It returns money when it sells holdings, not when you ask.

So the manager controls when your money goes in and when it comes back. Two terms matter. Committed capital is the total you agreed to invest; uncalled money stays with you until the fund asks for it. Drawn (paid-in) capital is what you have actually paid so far, and SEBI's benchmarking rules measure a scheme's assets as the total capital drawn down, not the commitment.

Commitments, drawdowns and exits are covered in how to invest in an AIF. Category III AIFs, which disclose NAV at least monthly if open-ended and quarterly if close-ended, suit fixed-period returns better.

Why AIF returns dip early: the J-curve

A typical private equity or venture fund's cumulative return dips before it rises, like the letter J. The J-curve in private equity has three causes. Management fees and set-up costs are charged from the start, before capital is deployed. New investments are often carried at or near cost until a sale or fresh funding round sets a price. And gains arrive late, when holdings are sold.

A negative IRR in the first two or three years is common and, on its own, says little about the final outcome. But the J-curve is a pattern, not a promise: some funds never climb out, and an early loss can be a real loss.

What IRR, DPI, RVPI and TVPI mean

IRR: the rate that accounts for timing

The internal rate of return (IRR) is the annual rate at which all your cash flows net to zero: capital calls count as money out, distributions as money in, and the current value of what is left as a final inflow. Because it accounts for timing, IRR rewards a manager who returns money quickly.

Check whether a figure is gross IRR (before fees, expenses and carried interest) or net IRR (after them, which is what investors earned). A gross figure on its own flatters the result.

DPI, RVPI and TVPI: the money multiples

• DPI (distributions to paid-in capital) is cash returned to you divided by what you paid in. A DPI of 1.0x means you have received back, in cash, as much as you put in. It is the one ratio that does not depend on a valuation.
• RVPI (residual value to paid-in capital) is the current valuation of investments still held, divided by what you paid in. It is an estimate.
• TVPI (total value to paid-in capital) is DPI plus RVPI: cash received plus the estimated value of what remains.

A worked example

These numbers are hypothetical, chosen only to show the arithmetic; they are not any fund's figures and do not indicate what any AIF will return. An investor commits ₹1 crore. The fund calls ₹20 lakh, ₹30 lakh, ₹20 lakh and ₹10 lakh in years 0 to 3, so ₹80 lakh is paid in and ₹20 lakh is never called. It distributes ₹16 lakh in year 4, ₹32 lakh in year 5 and ₹40 lakh in year 6. Values are after fees and expenses but before carried interest and tax.

At year 2 the TVPI is below 1.0x and the IRR is negative: that is the J-curve. By year 6 the investor has more cash back than was paid in, and of the 1.60x TVPI, 1.10x is cash while 0.50x is still an estimate.

IRR vs TVPI: why you need both

Take two hypothetical cases. ₹1 crore that becomes ₹2 crore in three years is a TVPI of 2.0x and an IRR of about 26%. ₹1 crore that becomes ₹2.5 crore in eight years is a TVPI of 2.5x but an IRR of about 12%. The first has the higher IRR; the second leaves you with ₹50 lakh more. IRR measures speed, the multiple measures money, and DPI tells you how much of either is real cash. Read all three together.

What is an AIF's vintage year

One Indian benchmarking agency defines the vintage year as the financial year in which the scheme declared its first close, so a first close between 1 April 2019 and 31 March 2020 makes it an FY 2019-20 vintage. Another report labels vintages simply as years, such as 2013, so check the report's own definition.

Funds of the same vintage invest and exit in similar markets and sit at the same point on the J-curve. A ten-year-old fund at 1.5x TVPI and a three-year-old fund at 1.2x are at different stages; the younger fund's figure is mostly unrealised value. Benchmark reports therefore group schemes by category and vintage, often with quartile and median figures, so you can see where a scheme sits among peers.

How SEBI benchmarks AIF performance

SEBI made performance benchmarking mandatory through its circular of 5 February 2020, clarified by a circular of 12 June 2020. The framework now sits in Chapter 22 of SEBI's Master Circular for AIFs dated 3 June 2026 (last updated 7 September 2026):

• An industry association representing at least 33% of AIFs by number notifies benchmarking agencies, and every AIF signs up with them.
• Every scheme that has completed one year from first close reports valuation and cash flow data, half-yearly, as at 30 September and 31 March. September data is due within 45 days; March data must be audited and is due within seven months, by 31 October.
• Agencies publish benchmarks for Category I, II and III separately for each year since 2012, in rupees and dollars, on pre-tax NAV. Angel Funds also report from FY 2025-26, under SEBI's circular of 10 September 2025.
• Any private placement memorandum (PPM) or marketing material that mentions past performance must include the agency's performance versus benchmark report, as must any investor report that compares the scheme with a benchmark.

One agency's published method measures returns after expenses but before carried interest and tax.

How AIF investments are valued

RVPI, TVPI and interim IRR all rest on valuations. Under Regulation 23 of the SEBI (Alternative Investment Funds) Regulations, 2012, Category I and II AIFs must have their investments valued at least once every six months by an independent valuer, or once a year with the approval of 75% of investors by value.

SEBI's standardised approach (circular of 21 June 2023, now Chapter 18 of the master circular) adds:

• Listed, traded securities follow mutual fund valuation norms; unlisted, non-traded and thinly traded ones follow the International Private Equity and Venture Capital Valuation (IPEV) Guidelines, as endorsed by an industry association.
• The valuer cannot be an associate of the manager, sponsor or trustee and needs three years of experience valuing unlisted securities. It must be a valuer registered with the Insolvency and Bankruptcy Board of India and holding a recognised professional membership, or a holding company or subsidiary of a SEBI-registered credit rating agency.
• If a holding's value moves more than 20% between two consecutive valuations, or more than 33% in a financial year, the manager must explain why to investors.

Since SEBI's circular of 6 February 2026, AIFs must also upload unit NAVs to the depositories within 30 days of each valuation, shown there as indicative NAV.

How fees and carry reduce AIF returns

A management fee of 1% to 2.5% a year is common, and the PPM states whether it is charged on committed capital, invested capital or NAV. Carried interest in an AIF, commonly 15% to 20% of profits, is usually paid to the manager only after investors clear a hurdle return, sometimes with a catch-up that then gives the manager its full share. Carry may be calculated fund-wide or deal by deal, and a clawback clause can recover carry paid too early. Every PPM must include a tabular example of how fees and the distribution waterfall apply to you.

In the worked example, the ₹48 lakh gain (₹1.28 crore of cash and value against ₹80 lakh paid in) is before carry. If 20% carry applied to the whole gain, ₹9.6 lakh would go to the manager, TVPI would fall from 1.60x to 1.48x and IRR from about 12% to under 10%. Tax then reduces what you keep; AIF taxation by category explains how.

How distributions arrive

Distributions are lumpy: they come when the fund sells a holding or receives interest or dividends, and are shared in proportion to commitment, subject to carried interest. For resident investors in Category I and II funds, 10% TDS is deducted on the income portion under section 393(1) of the Income-tax Act, 2025 (section 194LBB of the 1961 Act), so the cash you receive is less than the gross figure.

Near the end of a fund's life, holdings that cannot be sold may be distributed in-specie, as the securities themselves. With the consent of 75% of investors by value, the manager must arrange a bid for at least 25% of their value, and for the manager's track record and benchmark reporting the holdings count at the bid value, or at ₹1 if no such bid is arranged. If that consent is not obtained, the holdings are distributed in-specie anyway and counted at ₹1, and holdings an investor declines to take are written off.

What your quarterly or half-yearly report should show

SEBI's investor charter for AIFs sets the minimum: Category I and II valuations at least half-yearly, and financial information on investee companies and material risks within 180 days of the year end (60 days of the quarter end for Category III). Whatever the frequency, a clear report shows:

• your commitment, capital called and uncalled balance;
• each distribution, split into capital, income and TDS;
• NAV per unit, the valuation date and the valuer used;
• DPI, RVPI, TVPI and net IRR since inception;
• fees and expenses charged in the period;
• holdings, with reasons for any large change in value.

What to ask an AIF manager

To evaluate an AIF, ask for the numbers behind the headline:

1. Is this IRR gross or net of fees, expenses and carry?
2. How much of the TVPI is DPI, meaning cash already returned?
3. What is the vintage year, and where does the scheme sit in its agency benchmark?
4. Who is the independent valuer, and which valuation method applies?
5. How are the hurdle, catch-up and carry calculated, and is there a clawback?
6. How have the manager's earlier schemes done against their vintage benchmarks?

How Sanriya helps

Sanriya Finvest works as a distributor. For AIFs, we explain how performance is reported, walk you through the PPM, fee illustration and benchmark report, handle the commitment and drawdown paperwork, and service the investment through calls, distributions and statements. Sanriya is paid a commission by the manager and does not charge you a separate fee; this distribution fee is disclosed to you at onboarding. Every AIF scheme must also offer a Direct Plan with no distribution fee, and the decision to invest stays with you. To make sense of an AIF report you hold or are considering, contact us or see our AIF page.