Why LPs ask for DPI in 2025 and what the distribution drought means

Investors in private equity and venture funds talk about DPI in 2025 because the cash has not been coming back. Bain & Company's Global Private Equity Report 2025, published on 3 March, puts annual distributions of buyout funds at 11 per cent of net asset value, against an average of 29 per cent from 2014 to 2017. DPI, distributions to paid-in capital, is the one performance figure that contains no estimate: it counts only money that has arrived. For a private LP the consequence is practical. Plan your liquidity with the lower distribution rate, and read a fund's multiple by how much of it is cash and how much is still the manager's valuation.

What the reports say

Bain counts 29,000 companies still held by buyout funds, with USD 3.6 trillion of unrealised value. Exits did improve in 2024: Bain reports buyout exit value up 34 per cent to USD 468 billion. Measured against what the funds still hold, that is little. Fundraising across private asset classes fell for the third year in a row, to USD 1.1 trillion, 24 per cent less than the year before, and one reason is that investors wait for money from old funds before they commit to new ones.

McKinsey's Global Private Markets Report 2025, published in February, describes the same thing from the other side. In 2024, distributions to LPs exceeded capital contributions for the first time since 2015. Even so, the backlog of companies awaiting exit is larger than at any point since 2005, and the average buyout holding period stands at 6.7 years against a 20-year average of 5.7. In McKinsey's survey of large LPs, 2.5 times as many respondents as three years earlier rank DPI as a "most critical" performance metric.

One correction to the phrase that DPI has replaced IRR: in the same survey, IRR is still the metric most often ranked as critical. DPI has moved up next to it. That is the more accurate description, and the more useful one, because each number answers a different question.

One fund, three multiples

DPI is distributions divided by paid-in capital. RVPI is the remaining value, the fund's reported NAV, divided by paid-in capital. TVPI is the sum of the two.

Say you committed EUR 250,000 to a buyout fund of vintage 2018. Seven years on, the fund has called EUR 240,000 and distributed EUR 72,000. Your capital account shows a NAV of EUR 336,000.

DPI is 72,000 divided by 240,000, so 0.30. RVPI is 336,000 divided by 240,000, so 1.40. TVPI is 1.70. The quarterly report leads with the 1.70 and with a net IRR, say 12 per cent. Both are correct. What they do not show at first glance is that 82 per cent of the 1.70 consists of valuations and 18 per cent of money. After seven years you have received less than a third of what you paid in.

Whether that is a problem depends on what the remaining companies are sold for and when. The point of looking at DPI is that it separates what is known from what is expected.

Why the IRR looks fine while the cash is missing

A net IRR for a fund that still holds companies treats the current NAV as if it were paid out on the reporting date. As long as the manager carries the companies at rising or stable values, an exit that slips by a year lowers the IRR only gradually, and the report continues to look like a successful fund. The delay costs the LP something the IRR does not measure: the money is not available for the next commitment, for a call from another fund or for anything else.

There is a second effect. The valuations in the NAV are set by the manager, by rules and with an auditor's review at year end, but without a buyer. A sale is the only test of a valuation. A long period with few sales is therefore also a period in which a larger share of reported performance is untested. This does not mean the marks are wrong. It means that a TVPI of 1.70 with a DPI of 1.20 and a TVPI of 1.70 with a DPI of 0.30 are different pieces of information, and only one of them has been checked by a buyer.

Where DPI misleads

DPI is the wrong yardstick for a young fund. A fund of vintage 2022 has a DPI of zero or close to it and should have. In the first years a fund invests; it has nothing to distribute. Comparing DPI makes sense within one vintage and from roughly the fifth or sixth year on, and judging a manager by the DPI of the current fund in year three punishes exactly the patience the asset class requires.

DPI also says nothing about where a distribution came from. A sale of a company to a third party is one source. Others have become common while exits were slow: the fund sells a company to a continuation vehicle run by the same manager, or it borrows against the portfolio and distributes the loan, or a portfolio company takes on debt to pay a dividend. All of these produce cash for the LP and raise DPI. The second and third leave the companies in the fund with more debt against them. When a distribution notice arrives, it is worth reading which of these it is. In a continuation transaction you are usually given a choice between taking the cash and rolling into the new vehicle, with a deadline, and that choice deserves more attention than a routine notice.

And a high DPI early on can be one lucky exit. It tells you what happened, not what the remaining portfolio is worth.

What it means for your own plan

First, the distribution assumption. If your liquidity plan expects old funds to pay for the calls of new ones, check the rate you assumed. Applied to the example, 29 per cent of a NAV of EUR 336,000 would be about EUR 97,000 a year; 11 per cent is about EUR 37,000. Those are industry averages for buyout funds and no forecast for a single fund, but the gap of EUR 60,000 a year on one position shows the order of magnitude. We described in planning liquidity for capital calls why distributions should not be counted on for calls at all; this year is the illustration.

Second, timing. For a commitment made in 2018 you may have planned on most of the money returning between years five and nine. With holding periods a year longer than the long-term average, that window moves, and so does the earliest date at which the money can go into the next fund. Whether the market shock of April delays exits further will show in the reports for the second and third quarter. A plan should not assume it will not.

Third, the next commitment. When a manager raises a new fund, ask for DPI, RVPI and TVPI of each earlier fund separately, with the vintage. A manager whose fund from seven or eight years ago has returned less than half the paid-in capital may still be a good manager. You should hear the explanation before you sign, and you should know that your own distributions from that earlier fund are probably part of how you intended to pay for the new one.

Finally, do the split yourself. For each fund, write paid-in capital, distributions and NAV side by side with the date of the NAV, and compute the three multiples from your own bookings. The figures in the report are computed for the whole fund; yours can differ if you joined at a later closing or paid equalisation interest. The sum across all funds gives a portfolio DPI, and that single number says how much of your private portfolio has come home so far.