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Use a one-outflow, one-inflow case
The original fictional investment has an initial outflow of 100 and one final receipt of 150. There are no interim calls or distributions, and residual value is zero after liquidation. This simple timing structure permits a direct annual growth calculation.
Apply each horizon
Over three years the annual rate is 1.5^(1/3)−1 = 14.471424%. Over ten years it is 1.5^(1/10)−1 = 4.137974%. The multiple remains 150/100 = 1.5× in both cases.
| Horizon | Multiple | Annual rate |
|---|---|---|
| 3 years | 1.5× | 14.471424% |
| 10 years | 1.5× | 4.137974% |
Do not reuse this exponent for a complex schedule
With multiple contributions or distributions, taking a root of TVPI using fund age generally does not reproduce the investor IRR. Each transfer has its own date and exposure duration. The direct conversion here depends on having only the two endpoint cash flows.
Separate timing from investment quality
The exercise shows why a multiple alone cannot provide an annual return. It does not rank actual strategies, risk or liquidity. Comparable performance analysis needs the relevant full records and assumptions.