For a long time, private equity firms dazzled investors with high IRRs, aggressive growth narratives, and ambitious expansion strategies. Funds marketed their ability to deliver sky-high multiples, and LPs bought into the dream, confident that they were part of something exponential. But now, a new standard is emerging—one that prioritizes realized cash returns over theoretical gains.
In 2024, funds with strong DPI (Distributed to Paid-In) performance dominated the private markets conversation, proving that LPs are no longer content with paper gains . While TVPI still has its place, the real winners are the funds that can return capital efficiently while maintaining strong MOIC (Multiple on Invested Capital).
A significant shift is taking place in sectors that were once seen as slow-moving. Infrastructure and real estate, which accounted for $20.9 billion in exits, are proving that even traditionally illiquid assets can drive high DPI when structured correctly . These are not industries known for rapid cash returns, yet the best-performing funds have figured out how to extract value while ensuring liquidity.
At the heart of this change is a more disciplined approach to exit planning. The best PE firms are no longer betting everything on one or two massive exits at the end of a fund’s life cycle. Instead, they are layering liquidity events throughout the investment horizon, making use of secondary sales, structured exits, and dividend recapitalizations.
Take, for example, the rise of NAV-based financing, which has allowed GPs to provide early liquidity to investors without forcing a premature exit. The growth of secondaries, which saw a major uptick in 2024, is another lever being used to return capital faster without sacrificing long-term value creation.
The implications of this are massive. Investors who once evaluated funds primarily based on high TVPI are now asking tougher questions about DPI. They want to see not just potential future value, but actual money returned.
The shift is also reshaping how GPs operate. Funds that can demonstrate early and consistent distributions are able to raise follow-on capital more efficiently. In contrast, those that sit on high-marked portfolios without returning money risk falling out of favor with sophisticated LPs.
Data Souce – EY-IVCA PE/VC Monthly trend analysis: December 2024
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