Multiple on Invested Capital (MOIC) & Formula
What Is Multiple on Invested Capital (MOIC)?
Multiple on Invested Capital (MOIC) is one of the most fundamental metrics used to evaluate investment performance, yet it can seem complicated if you're unfamiliar with the terminology.
What Is MOIC (Multiple on Invested Capital)?
MOIC is a performance metric that shows the total value returned to investors relative to the capital they invested. It is expressed as a multiple, which is why it is called a “multiple” on invested capital.
For example, if you invest £1 million and receive £2.5 million back, your MOIC is 2.5x. The metric captures both realised returns (cash received) and unrealised returns (the current value of investments still held), making it particularly useful across different stages of a fund’s lifecycle.
MOIC is widely used in private equity, private credit and other alternative strategies because it provides clarity on absolute value creation. Unlike more complex metrics, it offers a straightforward view of performance.
Why MOIC Is Important in Private Equity
MOIC offers simplicity and transparency. Rather than relying on benchmarks or time-weighted calculations, it answers a direct question: how many times has your capital multiplied?
This makes it particularly valuable when evaluating opportunities in private equity. Investors can quickly assess value creation, compare fund performance, and make more confident capital allocation decisions.
How MOIC Is Calculated
MOIC = Total Value Returned ÷ Capital Invested
Total Value Returned is made up of:
- Distributions (cash paid out)
- Residual value (current value of remaining investments)
For example, if you invest £200,000 in a private equity fund, receive £120,000 in distributions, and your remaining investment is valued at £160,000, your total value is £280,000. This results in a MOIC of 1.4x.
This simplicity is one of the key reasons MOIC is so widely used.
Limitations of MOIC
MOIC does not account for time. A fund doubling your capital in two years is significantly more attractive than one taking eight years, yet both would show the same MOIC.
It can also overstate performance when unrealised gains are included, as these valuations may change before exit.
For a more complete picture, MOIC is typically used alongside metrics such as IRR and DPI.
Gross MOIC vs Net MOIC
There are two versions of MOIC: gross and net.
- Gross MOIC reflects the value created by investments before fees and expenses.
- Net MOIC reflects the returns received after fees, including management and performance fees.
The difference can be significant. A fund reporting a 2.5x gross MOIC might deliver a 2.0x net MOIC depending on its fee structure.
Investors typically focus on net MOIC, as this reflects actual returns.
MOIC vs TVPI
MOIC and TVPI are often used interchangeably, as both measure total value relative to invested capital.
However, neither metric distinguishes between realised and unrealised returns. This is why they are often paired with DPI, which shows the cash actually returned to investors.
MOIC vs IRR
MOIC and IRR measure different aspects of performance.
- MOIC shows absolute return (how many times capital has multiplied)
- IRR shows annualised return, taking time into account
The same 2.5x MOIC could represent a 20% IRR over five years or 10% over ten years. Used together, they provide a more complete understanding of performance.
Why MOIC Matters
MOIC is a core metric in how we evaluate investments at Connection Capital. It provides clarity and transparency, helping investors understand value creation.
When assessing opportunities, MOIC helps determine whether capital is being deployed effectively. When reporting to clients, it offers a clear and intuitive way to communicate performance.
While no single metric is sufficient on its own, combining MOIC with IRR, DPI and broader market context provides a practical framework for making informed investment decisions.
For more on private markets and investment strategies, explore our understanding alternatives section.