What it means
The calculation adds cash already received from an investment to the estimated value of what is still held, then divides by the total capital invested. Because it includes unrealised value, a MOIC quoted on a live fund is partly an opinion, which is why experienced investors also look at the realised portion on its own.
Its great strength is that it ignores time, and that is also its great weakness. Doubling your money in one year and doubling it in nine years both produce a MOIC of 2.0 times, so the metric is almost always reported next to an internal rate of return, which does account for timing.
Funds report the figure both gross and net. Gross MOIC measures the performance of the underlying investments, while net MOIC is what the investor actually receives after management fees and the manager's share of profits, and the gap between them is often substantial.
A related term, distributions to paid in capital, strips out unrealised value entirely and counts only cash returned. Comparing that with MOIC tells you how much of a headline result is money in the bank rather than a valuation the manager has placed on assets it still owns.
Outside fund management the same idea is used for individual projects, where it is sometimes called the investment multiple or cash on cash multiple. A factory upgrade that costs $2 million and generates $5 million of cash over its life has returned 2.5 times capital, regardless of how long that took.
In practice
Real-world examples.
Example
A venture fund reports a portfolio MOIC of 2.8 times, but only 0.9 times has been returned as cash. Its investors press for detail on how the remaining 1.9 times has been valued, since none of it has yet been tested by a sale.
Example
A family office compares two property deals: one returned 1.8 times over three years, the other 2.4 times over eleven. Despite the lower multiple, the first deal produced a far better annual return and freed capital for reinvestment.
Example
A manufacturer applies the same logic to capital projects, ranking proposals by expected cash returned per dollar spent. A packaging line at 3.1 times over its life beats a warehouse extension at 1.6 times, and the board funds the line first.
Think of it
“MOIC is the simple multiple-total value divided by what you put in.
Formula
Calculation
MOIC = (realised proceeds + unrealised value) / total invested capital
A growth equity fund invests $25 million in a payments business across two rounds. Six years later it has sold two thirds of its shareholding for $70 million and values the remaining stake at $30 million. Total value = $70 million + $30 million = $100 million, so MOIC = $100 million / $25 million = 4.0 times.
Timing matters for judging that result. Four times over six years is equivalent to an annual compound return of about 26%, because 1.26 multiplied by itself six times comes to roughly 4.0. If instead the same 4.0 times had taken twelve years, the annual return would be near 12%, which is a very different investment despite the identical multiple.Case study
Seen in the real world.
This is an illustrative and entirely fictional case. Ashgrove Partners, an invented mid market buyout firm, raised its third fund on the strength of a reported 3.2 times gross MOIC on the previous vintage. Prospective investors were impressed until one of them asked how the figure split between cash returned and holdings still owned.
The honest answer, in this fictional scenario, was that 0.7 times had been distributed and 2.5 times was carried at the manager's own valuation, much of it in two companies bought at the top of a hot market. Net of fees and carried interest, the realistic net multiple to investors was closer to 2.4 times if those valuations held, and materially less if they did not.
Ashgrove's fictional partners responded by reporting realised and unrealised multiples separately from then on, alongside an internal rate of return for each. The fund raised more slowly but with investors who understood exactly what they were buying.
Watch out
Common mistakes.
- Quoting MOIC without saying whether it is gross or net of fees, which can overstate the investor's actual outcome by a wide margin.
- Comparing multiples across investments of very different lengths, since the measure takes no account of how long the money was tied up.
- Treating unrealised value as equivalent to cash received, when it is an estimate that has not been tested by a sale.
Questions
People also ask.
What counts as a good MOIC?
It depends on strategy and holding period, but buyout funds often target around 2.0 to 2.5 times over five years, while venture funds accept many failures in pursuit of a few very large multiples.
How does MOIC relate to internal rate of return?
MOIC says how much you made and the rate of return says how fast, so a strong result needs both to be respectable.
Can MOIC ever be below 1.0 times?
Yes, and that simply means the investment is currently worth less than the capital put into it.
From the founder's library
Take it further with the book.
Build your financial confidence beyond this definition. Shihan's full-length guide, Accounting Fundamentals, takes the same plain-English approach and turns it into a complete, practical playbook for non-finance managers, business owners and students - with chapter-end quiz answers and presentation slides included.
25% off with code MMHQ25, applied at checkout. Priced in USD - checkout may show the equivalent in your local currency.
View the book and save 25%