Multiple on invested capital
What is Multiple on invested capital?
Multiple on invested capital, or MOIC, is total realized and unrealized investment value divided by the capital invested under a stated definition.
MOIC reporting should state gross or net, realized or total, numerator, denominator, currency, and valuation date. The same label is used inconsistently for deal and fund metrics. Portfolio aggregation should sum compatible values and capital before division, not average deal multiples regardless of size.
A high multiple over a very long period can represent a modest annualized return.
Deal comparisons should show invested amount and contribution to fund value, preventing a tiny exceptional outcome from dominating the narrative. Write-offs belong in the complete deal set, including investments omitted from selected case studies.
Calculation
At deal level, MOIC commonly equals realized proceeds plus current value divided by invested cost. A 2.0x multiple means total measured value is twice invested capital before or after specified fees depending on the definition. Follow-ons, dividends, write-offs, leverage, fees, and currency must be treated consistently.
Gross and net usage
Managers often report gross deal MOIC before fund fees and carry, while investors focus on net fund multiples. The fund-level term may overlap with TVPI, but denominators and expenses can differ. A label without formula is insufficient. Reconcile numerator and denominator to source cash flows and reported NAV.
Time limitation
MOIC ignores how long capital was invested. A 2.0x outcome in three years is economically different from 2.0x in twelve years. IRR incorporates timing but has its own limitations. Review both, along with cash-flow duration, leverage, risk, and the share of value that has actually been realized.
Interim valuation
Unrealized value relies on manager marks and can dominate early results. Comparable-company multiples, financing rounds, discounted cash flow, and transactions introduce judgment. A high interim MOIC can fall before exit. Separate realized multiple, unrealized multiple, and total, and compare marks with subsequent sale proceeds.
Practical comparison
State deal or fund, gross or net, as-of date, currency, invested-capital definition, and valuation source. Aggregate by summing total value and invested capital, not averaging multiples. Check whether recapitalization distributions reduce cost in the stated method. Avoid ranking investments solely by multiple without time, risk, and realizability.
Also known as: MOIC
Sources and further reading
- Investments in Private Capital: Equity and Debt, CFA Institute
- ILPA Reporting Template, Institutional Limited Partners Association