Distributions to paid-in capital, or DPI, measures how much cash a fund has actually returned to its limited partners relative to how much those LPs have paid in — it is the “cash-on-cash” half of fund performance, and unlike a mark on an unrealized position, a DPI number cannot be revised down by the next quarter’s valuation.
The industry-standard definition comes from the Institutional Limited Partners Association — whose membership and reporting templates a Canadian LP is just as likely to be working from as a US one, and which keeps a Toronto office alongside Washington and London — and it is exactly as literal as the name suggests: DPI is “the ratio of money distributed to Limited Partners by the Fund, relative to contributions.” Paid-in capital itself is “the amount of committed capital a limited partner has actually transferred to a venture fund,” not the full amount committed at the fund’s close — a fund that has called 60% of commitments is being measured against that 60%, not the full fund size, until the rest is actually drawn.
DPI is only one piece of the standard reporting trio. RVPI — “the ratio of the current value of all remaining investments within a fund to the total contributions of Limited Partners to date” — captures everything still unrealized, and the two add together into TVPI, total value to paid-in capital. Early in a fund’s life, before any exits, DPI sits at or near zero and the whole return is RVPI — the pattern ILPA’s own glossary calls the J-curve effect, where “the common practice of paying the management fee and start-up costs out of the first draw-down does not produce an equivalent book value,” so a fund “will initially show a negative return.” DPI only starts moving once cash actually comes back, which is precisely why LPs treat it as the harder, less revisable number.
A mid-market fund has called $40,000,000 of LP commitments to date and distributed $22,000,000 back in cash from two realized exits. DPI is $22,000,000 ÷ $40,000,000 = 0.55×. The fund’s remaining four portfolio companies carry a current NAV of $35,000,000, giving an RVPI of $35,000,000 ÷ $40,000,000 = 0.875×. Add the two together and TVPI is 1.425× — so on paper the fund looks like it has created meaningfully more than it has called. But an LP reading the quarterly report knows the 0.875× RVPI is a mark that can move with the next valuation cycle, while the 0.55× DPI is cash that has already left the fund and landed in LP accounts. Those two components of the same 1.425× TVPI carry very different weight in an LP’s own read on the fund.
See also: Internal rate of return · Capital commitment · Distribution waterfall.
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