Total value to paid-in capital, or TVPI, is a private equity fund’s cumulative distributions plus the current value of everything it still holds, divided by the capital limited partners have paid in — and it is built from exactly two components, one realised and one not.
TVPI is reported as the sum of two ratios a Canadian LP’s quarterly capital account statement will usually show separately. DPI, distributed to paid-in capital, is the realised piece — actual cash the fund has sent back, divided by capital called. RVPI, residual value to paid-in capital, is the unrealised piece — the general partner’s current fair-value mark on everything still in the portfolio, divided by the same capital-called denominator. TVPI = DPI + RVPI. A fund can carry an attractive TVPI that is almost entirely RVPI — paper value the GP has marked up but not yet converted to cash — which is a materially different position for an LP than the same TVPI built mostly from DPI, money that has already left the fund and cannot be marked down again.
The DPI half of that number usually reaches the fund as a dividend paid by a Canadian portfolio company, and that payment is not automatic. A corporation governed by the Canada Business Corporations Act, s. 42 may not declare or pay a dividend if there are reasonable grounds to believe that, after the payment, it would be unable to pay its liabilities as they become due, or that the realisable value of its assets would fall below the total of its liabilities and stated capital. A portfolio company’s board has to be satisfied that test is met before a distribution that will move an LP’s DPI can be declared, which is one reason GPs schedule distribution timing around audited financials rather than paying out on demand.
A fund has called $10 million from its LPs to date. It has distributed $4 million in cash from two exits, and its remaining portfolio companies are currently marked at a combined $9 million. DPI is $4 million ÷ $10 million = 0.4x. RVPI is $9 million ÷ $10 million = 0.9x. TVPI is the sum: 1.3x. An LP reading only the 1.3x headline would not know that more than two-thirds of it is still a mark on unsold companies rather than cash already banked — which is exactly why the DPI/RVPI split, not the combined TVPI alone, is what a fund principal should ask a GP to report every quarter.
See also: Multiple on invested capital · Dividend recapitalisation · J-curve.
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