What is Internal Rate of Return (IRR)?

Internal Rate of Return (IRR) is a percentage metric that shows the annualized return that a fund has earned from its portfolio companies. Gross IRR ignores fees paid to the manager (carry and management fee), while Net IRR calculates the return to LPs once those fees have been factored in. IRR is a helpful tool to analyze funds across different vintages, since it takes into account the amount of time it took for a fund to earn returns.