Pinion Blog
Gross vs Net MOIC: What's the Difference?
Two multiples describe the same fund, but only one reflects what actually lands in your pocket. Here is how gross and net MOIC differ, and why the gap matters.
I just received a quarterly update from a fund we are in and the fund reported both our Gross MOIC and our Net MOIC. I was like, wait, what’s the difference?
When you track a fund position, you will often see two versions of the same performance multiple: gross MOIC and net MOIC. They sound interchangeable, but the difference between them is the difference between how the fund's investments performed (gross) and what you actually earned as an investor (net).
MOIC, or multiple on invested capital, is simply total value divided by the capital that went in. Gross MOIC measures this at the deal level. It takes the realized proceeds and remaining value of the fund's portfolio companies and divides by the capital the manager put into those companies. It reflects raw investment selection and timing, before any cost of running the fund.
Net MOIC is the same idea from your seat as a limited partner, after fees. It divides what the fund returns to you, plus the current value of your stake, by the capital you actually paid in. That paid-in capital includes management fees, and the value returned is net of carried interest and fund expenses.
The gap between the two numbers is the cost of access. A typical fund charges an annual management fee and keeps a share of the profits, often around two percent and twenty percent. Over a ten-year life, that structure can turn a 3.0x gross result into something closer to 2.3x or 2.4x net. The investments did one thing; you kept less.
So which number should you watch? Gross MOIC tells you whether the manager can actually pick and build winners, which matters when you are deciding whether to back their next fund. Net MOIC tells you what the position is worth to you, and it is the only figure that belongs in your own return calculations. When you compare funds, make sure you are comparing net to net, because a headline gross multiple can flatter a fund whose fees quietly eat the difference.
MOIC is only one of the multiples a fund will report. For how it stacks up against the other figure on your statement, read our companion piece on MOIC vs. TVPI.
At the end of the day, you buy tacos with net MOIC.