Which metric allows investors to see how much money has been returned compared to the amount invested?

The metric that effectively shows how much money has been returned compared to the amount invested is Distribution to Paid-In Capital (DPI). DPI is a performance measure used primarily in private equity that specifically indicates the total distributions made to investors relative to the total capital they have contributed. It gives investors a clear sense of liquidity and realized gains, showing how much cash or assets have been returned from investments.

This metric is particularly important because it focuses on the actual cash returns received by the investors, offering a direct comparison between the capital they have invested and the returns they have received to date. DPI does not consider unrealized gains or the total value of remaining investments, which makes it a straightforward measure of realized performance for investors.

In contrast, metrics like Cash-on-Cash return focus more on the cash returns produced annually as a percentage of the cash invested, which doesn’t provide a comprehensive view of total distributions relative to invested capital over time. The Internal Rate of Return (IRR) looks at the annualized effective compound return on invested capital but also incorporates the timing of cash flows, making it more complex and less direct in showing returns relative to the original investment. Multiple on Invested Capital (MOIC) measures the total value returned divided by the total invested