It is perhaps the most important number in the private-equity world. It is also at risk of being massaged in a way that undermines the industry’s credibility and adds dangers when a downturn comes. The internal rate of return is the key performance metric published by private-equity firms. A percentage that measures annualized returns, the IRR is based on a complex set of numbers tied to fund cash flows. Investors use IRR to choose which funds to invest in.

Source: Wall Street Journal March 09, 2018 13:03 UTC