Private Equity Performance Measurement Comparison

Very Hard Private Equity Valuation Performance Measurement

In the context of private equity performance measurement, it is essential to evaluate the effectiveness of investment strategies and their associated returns. A private equity fund has reported an Internal Rate of Return (IRR) of 15% over a 7-year period, with a total capital commitment of $100 million. However, industry benchmarks show a time-weighted return (TWR) of 12% for comparable investments in the same sector over the same period.

Given this information, consider which of the following statements regarding the fund's performance relative to the benchmark is most accurate:

The fund's IRR of 15% exceeds the benchmark's TWR of 12%, indicating superior performance.

The IRR is not a reliable measure for comparing against TWR due to cash flow timing differences.

The TWR provides a better comparison for the fund's performance, as it eliminates the effects of cash flows and timing.

Hint

Submitted3.3K

Correct3.0K

% Correct93%