Comparison of IRR and MIRR in Private Equity Performance Measurement

In assessing the performance of a private equity fund, investors often look at several key metrics, one of which is the Internal Rate of Return (IRR). However, IRR can be misleading when funds have cash flows that occur at different times and amounts. To address this, some practitioners recommend using the Modified Internal Rate of Return (MIRR). This allows for a more nuanced view of performance by taking into account the cost of investment and reinvestment.

Which of the following statements about the difference between IRR and MIRR in private equity fund performance measurement is true?