What is Multiple on Invested Capital?
Short answer: Multiple on invested capital, or MOIC, measures value magnitude relative to invested capital. It can be calculated for one investment, a portfolio or a vehicle, so the basis must always be labelled.
At deal level, gross MOIC commonly compares the fund's realised proceeds and remaining investment value with capital invested in that company. At fund or investor level, fees, expenses, facilities and carried interest can change the result, and terminology may overlap with TVPI only when methodology is explicit. MOIC differs from IRR because it ignores how long capital was invested. A 2.0x multiple achieved in two years and the same multiple achieved in ten years are identical by MOIC but economically different. Realised and unrealised portions should also be distinguished because an appraisal is not a distribution.
How it works
The reporting team defines the unit of analysis, measurement date, currency, gross or net basis, invested-capital components and treatment of follow-ons, dividends, recapitalisations, write-offs, fees and remaining value. Cash flows and valuations reconcile to the ledger and the approved valuation process. Partially realised investments include both proceeds and residual value without counting the same amount twice. Comparisons use consistent methodology. Common mistakes include dividing enterprise value by equity invested without deducting debt, excluding follow-on capital, presenting gross deal MOIC as an LP return, ignoring time and using a latest financing mark without reviewing its rights or market context.
MOIC = (cumulative realised proceeds + remaining value) / cumulative invested capital on the stated basis
Example
A fund invests 40 in a company and later contributes another 10, bringing invested capital to 50. It receives 25 through a partial sale and values the remaining stake at 55 under the fund policy. Gross deal MOIC is (25 + 55) / 50 = 1.60x. The realised component is 0.50x and the unrealised component is 1.10x. If the investment has been held for six years, the 1.60x figure does not reveal the annualised return. Fund fees, expenses, carried interest and other investments mean an LP's net fund multiple will not equal this gross deal MOIC.
Why it matters
Private-investment teams use MOIC to assess value creation across investments and to separate realised proceeds from residual marks. Investment committees use it alongside IRR, cash flow, downside and operating performance. GPs report it to LPs under a consistent methodology, while LPs distinguish gross portfolio measures from net fund outcomes. Portfolio-company boards may track enterprise and equity value drivers but should not use sponsor MOIC as an operating target without considering company strategy, stakeholders and financing risk.
MOIC is not universally standardised, and fund documents, reporting templates and marketing rules may prescribe presentation. Unrealised value depends on judgement and can change before exit. Currency, tax, subscription facilities, fees, expenses, carry and investor-specific timing affect net results. Comparisons across funds, vintages and strategies require consistent scope and dates. The metric should be reconciled and labelled, not used alone as investment advice or evidence that value will be realised.