Multiple on Invested Capital (MOIC)
$$\text{MOIC} = \frac{\text{Total Value Received}}{\text{Total Capital Invested}}$$
What is Multiple on Invested Capital (MOIC)?
Multiple on Invested Capital (MOIC) - also called Money-on-Money Multiple (MoM) or investment multiple - measures the total value returned by an investment relative to the total capital invested, expressed as a simple multiple. A 3.0x MOIC means every dollar invested returned three dollars in total (the original dollar plus two dollars of gain). MOIC is the primary return metric in private equity, venture capital, and real estate private markets.
MOIC is deliberately simple: it ignores time. A 3.0x MOIC realised in three years and the same 3.0x realised over ten years are reported identically as "3.0x" - despite representing dramatically different annualised returns (roughly 44% vs 12% IRR respectively). This is why MOIC and IRR are always presented together in private markets: MOIC shows how much capital was returned; IRR shows how quickly. Neither metric alone tells the full story.
MOIC is calculated as Total Value Received divided by Total Capital Invested. Total value includes all distributions (dividends, proceeds from partial sales, loan repayments) plus any residual unrealised value (the current estimated value of unsold assets). Capital invested is the sum of all capital drawdowns - the actual cash committed to the investment. On a fund level, MOIC is calculated across the entire portfolio.
When to use Multiple on Invested Capital (MOIC)
Use MOIC as the primary return lens for private equity, venture capital, or real estate investments where timing is less predictable and liquidity events are discrete. It directly answers: "did we get our money back, and by how much?" A gross MOIC above 2.0x is generally considered the minimum acceptable return for a typical 5-year private equity hold (compensating for illiquidity and risk). 3.0x-5.0x gross MOIC is considered strong performance. Always combine MOIC with IRR to assess both the magnitude and the pace of returns.
Worked examples
| Investment | Capital In | Distributions | Residual Value | MOIC |
|---|---|---|---|---|
| PE fund - portfolio company | $10M | $15M | $20M | 3.5x |
| VC - early stage startup | $5M | $0 | $40M (paper) | 8.0x |
| Real estate - rental + sale | $2M | $0.5M (rent) | $3.2M (sale) | 1.85x |
| Distressed debt | $20M | $25M | $0 | 1.25x |
| Failed investment | $3M | $0.5M | $0 | 0.17x |
Common pitfalls
A high MOIC with a long hold period can mask a mediocre IRR. A 3.0x MOIC over 12 years is only a ~9.6% IRR - below many institutional hurdle rates. Conversely, a fast 2.0x in two years is a 41% IRR. Always check both metrics together. MOIC also treats unrealised (paper) value identically to distributed cash - inflating reported returns for funds with large unsold portfolios. Always distinguish Gross MOIC (before management fees and carried interest) from Net MOIC (after fees). Fees typically reduce MOIC by 0.3x-0.7x over a 10-year fund life.
Frequently asked questions
What is the difference between MOIC and IRR?
MOIC measures the total amount of capital returned relative to invested capital - a simple multiple, time-agnostic. IRR measures the annualised rate of return, accounting for the exact timing of every cash flow. A high MOIC with a slow realisation produces a lower IRR than the same MOIC realised quickly. In private equity, both are always reported together: MOIC for magnitude, IRR for efficiency.
What is a good MOIC for private equity?
Industry benchmarks: below 1.0x means loss of capital; 1.0x-2.0x is below expectations for a standard 5-year PE hold; 2.0x-3.0x is considered adequate to good; 3.0x-5.0x is strong performance; above 5.0x is exceptional, typically reserved for early-stage venture investments in breakout companies. These are gross figures - net MOIC after fees runs 0.3x-0.7x lower.
What is the difference between Gross MOIC and Net MOIC?
Gross MOIC is calculated before deducting management fees and carried interest. Net MOIC reflects what limited partners (investors) actually received after all fees. Management fees (typically 2% per year) reduce capital available for investment; carried interest (typically 20% of profits above the hurdle rate) reduces distributions. A fund with a 3.0x gross MOIC might deliver 2.3x-2.6x net MOIC to investors over a 10-year life.