Private equity performance is commonly measured using IRR and TVPI, but both rely on valuation assumptions rather than realized outcomes. DPI, or Distributed to Paid-In capital, measures actual cash returned to investors and provides a clearer view of true private equity performance.
Recent data highlights a slowdown in private equity distributions. In H1 2025, distribution yield declined to approximately 6%, well below the 10-year average of 14%, while holding periods have extended and a significant share of portfolio companies remain unrealized. This dynamic is contributing to a growing liquidity gap for investors across private markets.
Lower middle market private equity strategies operate under a different model. With lower entry multiples, a broader buyer universe, and shorter hold periods, these strategies are less dependent on IPO markets and more capable of generating earlier cash distributions.
As private equity liquidity becomes a more prominent concern, the distinction between valuation-based metrics and realized cash returns is becoming increasingly important for allocators evaluating private market investments.