Deal Level Due Diligence: Scrutinizing Risk and Return
This week's chart displays the total value to paid in capital (TVPI) performance attribution from an example manager. This visualization of distribution can serve as a health check for the portfolio. A large proportion of deals have TVPIs greater than 1.0, which indicates that many investments are at least returning the initial capital invested, which is a positive sign. Conversely, 7 deals in this example manager have TVPIs less than 1.0, which reflects underperformance.
Evaluating this, alongside other performance measures, such as pooled and capital weighted means, and additional metrics like internal rate of return (IRR) and distributions to paid in capital, should be done to fully understand a GP’s deal level return profile.
For more insights, explore our latest white paper, "Private Markets Rebound: Why Effective Due Diligence is Mission Critical."
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