AIMR-PPS Internal Rate of Return

C

Cumulative internal rate of return must be presented since inception of the fund and be net of fees, expenses and carry to the limited partner. Irr must be calculated based on cash-on-cash returns plus residual value.

According to the AIMR-PPS (Association for Investment Management and Research-Performance Presentation Standards) for venture and private placements, the correct answer is C. cumulative.

The AIMR-PPS provides guidelines for presenting and reporting performance information for investment funds, including venture capital and private placement funds. The internal rate of return (IRR) is a widely used measure of investment performance, and it calculates the rate at which an investment grows over a given period.

In the context of venture and private placements, the AIMR-PPS requires that the cumulative internal rate of return be presented. "Cumulative" means that the IRR calculation considers the total return generated by the investment fund since its inception. It takes into account all cash flows, including both positive (gains, profits) and negative (losses, expenses) cash flows.

Furthermore, the cumulative IRR must be presented "since inception of the fund." This means that the calculation starts from the beginning of the fund's existence, considering all historical cash flows and returns up to the present time.

In addition, the cumulative IRR should be "net of fees, expenses, and carry to the limited partner." This means that the performance measurement should account for any costs or charges associated with managing the fund, including management fees, operating expenses, and carried interest. By subtracting these fees and expenses from the fund's returns, the net cumulative IRR provides a more accurate reflection of the investment performance available to the limited partner.

To summarize, the AIMR-PPS for venture and private placements mandates the presentation of the cumulative internal rate of return since the inception of the fund, taking into account all cash flows and net of fees, expenses, and carry to the limited partner.