The IRR is a performance metric which expresses the discount rate that sets a fund’s cash outflows equal to its inflows in present value terms. In other words, all of the fund’s contributions and distributions are listed, and the discount rate that makes them add up to zero is solved for. The net IRR is a modified IRR value that has taken into consideration management fees and any carried interest. The net IRR is the net return earned by PE investors over a particular period, which is calculated on the basis of cash flows to and from investors, after the deduction of all fees and expenses. IRR is a dollar-based concept which takes into account the effect of time – as an investment is held for longer, IRR will lessen (in other words, doubling your money in two years is much better than doubling your money in five years). Although IRR is a standard performance metric within private equity, it does not reflect actual cash returned to investors, and so should be analyzed in conjunction with the relevant MOIC metric.