Distributions to Paid-in Capital
Also written DPI · DPI (Distributions to Paid-in Capital) · Distributed to Paid-in Capital · Realisation multiple
Cumulative cash actually distributed to investors divided by the capital they have paid in — the realisation multiple, and the one return measure a fund cannot flatter with its own valuations.
In plain language
Every other measure of a private fund's performance depends on somebody valuing assets that have not been sold. DPI does not. It counts money that has left the fund and reached investors' bank accounts, divided by money investors put in.
That is why it is called the realisation multiple, and why it is the number an experienced investor looks at last — because it is the only one that cannot be argued with.
A DPI of 1.00 means investors have got their money back. Nothing more. Everything above 1.00 is actual profit in hand.
How it works
DPI is one of a family of three multiples that the workbook treats together, and they only make sense as a set:
- DPI — cash out, divided by paid-in capital. Rises as the fund harvests.
- RVPI (Residual Value to Paid-in Capital) — the fair value of what the fund still holds, divided by paid-in capital. High early, falls to zero at liquidation.
- TVPI (Total Value to Paid-in Capital) — the "net multiple", DPI plus RVPI.
Their behaviour over a fund's life is predictable and is itself examinable:
- Before capital calls and the investing phase, TVPI is below 1 — the corpus has been reduced by fees and expenses.
- Through the vintage years, value sits in unrealised holdings, so the fund's worth is mostly RVPI.
- As the fund harvests, DPI rises. When every investment has been exited, RVPI is zero and DPI = TVPI. Until then, DPI + RVPI = TVPI.
Two cousins complete the picture. The PIC multiple is paid-in capital divided by commitments — how invested the fund is, not how well it has done. MOIC divides total realised and unrealised value by total invested capital, and equals TVPI once all commitments have been called. A consistently large MOIC-to-RVPI ratio is a red flag that the underlying valuations deserve revisiting.
The formula
DPI = Cumulative distributions to investors ÷ Paid-in capital
RVPI = Residual (fair) value of the portfolio ÷ Paid-in capital
TVPI = DPI + RVPI
PIC multiple = Paid-in capital ÷ Capital commitments
MOIC = (Realised + unrealised value) ÷ Total invested capital
A worked example
Fund ABC, a close-ended Category I AIF with Rs 50 crore of capital fully called and a five-year life. All assets are reinvested each year and the net assets are distributed at liquidation.
Best case:
| 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|
| Paid-in capital (Rs) | 50,00,00,000 | 50,00,00,000 | 50,00,00,000 | 50,00,00,000 | 50,00,00,000 |
| Distributions (Rs) | — | — | — | — | 1,02,62,28,640 |
| Unrealised AUM (Rs) | 56,42,34,000 | 63,29,95,000 | 75,08,71,000 | 87,85,70,000 | — |
| DPI | — | — | — | — | 2.05 |
| RVPI | 1.13 | 1.27 | 1.50 | 1.76 | — |
| TVPI | 1.13 | 1.27 | 1.50 | 1.76 | 2.05 |
DPI in 2023 is Rs 1,02,62,28,640 ÷ Rs 50,00,00,000 = 2.05. Read it as: the fund returned Rs 1.05 of profit on every rupee, over five years.
Worst case: the terminal distribution is only Rs 66,31,70,560, so DPI = 1.33 — 33 paise of profit on every rupee, over the same five years.
Now the comparison that matters. Put Fund ABC beside a peer, Fund XYZ, which distributed as it went:
| 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|
| ABC — TVPI | 1.13 | 1.27 | 1.50 | 1.76 | 2.05 |
| ABC — DPI | — | — | — | — | 2.05 |
| XYZ — TVPI | 1.12 | 1.31 | 1.55 | 1.82 | 2.01 |
| XYZ — DPI | — | 0.15 | 0.33 | 0.50 | 2.01 |
ABC finishes with the higher TVPI, 2.05 against 2.01. XYZ is still the better fund, and the workbook says so: it returned half its capital before ABC returned any, which took market risk off the table for four years while achieving essentially the same multiple.
Why NISM asks about it
Chapter 7 (Fund Performance and Benchmarking of AIFs), section 7.3.4.2, with the DPI/RVPI/TVPI worked illustration at Example 7.2 and the peer comparison that follows it. The same chapter's twelve-step case study computes all three off a completed distribution waterfall.
Expect: given cumulative distributions and paid-in capital, compute DPI; given DPI and TVPI, back out RVPI; and the judgement question — two funds with near-identical TVPI, which is better? The answer is the one that distributed earlier.
Common exam traps
- DPI counts cash out, not gain. A DPI of 1.00 is a fund that returned exactly what it took, with no profit at all.
- The workbook states DPI two ways. Its tables give a multiple (2.05). Its formula block on the preceding page gives ((cumulative distributions ÷ PIC) − 1) × 100, which turns the same fund into 105%. Both appear in Chapter 7; read which form the question wants before answering.
- The denominator is paid-in capital, not committed capital. Commitments belong in the PIC multiple, which is a different ratio answering a different question.
- TVPI = DPI + RVPI only until the fund is fully realised. After the last exit, RVPI is zero and DPI equals TVPI.
- DPI ignores timing entirely. A DPI of 2.05 over five years and over twelve years are not remotely the same investment — that is what IRR is for, and why the two are used together.
- MOIC equals TVPI only once all committed capital has been called. Before that the denominators differ.
- A high RVPI is only as good as the valuation behind it. The workbook is explicit that residual value is an estimate, and that a large MOIC-to-RVPI ratio should send you back to the valuation file.
Check yourself
1.The MOIC of an AIF is the aggregate of its DPI and RVPI when all the capital calls are met. State whether True or False.
- a)True
- b)False
Show the answer
Answer: (a) True
True. Work through the definitions:
- TVPI = DPI + RVPI always, by construction.
- MOIC = Total returns (realised + unrealised) / Total invested capital. Its numerator is identical to the TVPI numerator.
- When all capital calls have been met, total invested capital equals total paid-in capital. The denominators then match too.
So MOIC = TVPI = DPI + RVPI under that condition. The condition matters: if the fund holds drawn-but-undeployed cash, invested capital is smaller than paid-in capital and MOIC would exceed TVPI.
The workbook adds a related warning - a consistently large MOIC-to-RVPI ratio is a red flag that should prompt a fresh look at the valuations of the underlying assets.
2.A fund has commitments of Rs 1,000 crore, has drawn Rs 1,000 crore, has made cumulative distributions of Rs 400 crore, and its unrealised portfolio is valued at Rs 1,100 crore. Its DPI, RVPI and TVPI respectively are:
- a)0.40, 1.10 and 1.50
- b)1.10, 0.40 and 1.50
- c)0.40, 1.10 and 0.70
- d)0.40, 1.50 and 1.90
Show the answer
Answer: (a) 0.40, 1.10 and 1.50
Paid-in capital is Rs 1,000 crore.
DPI = Total distributions / PIC = 400 / 1,000 = 0.40 RVPI = AUM / PIC = 1,100 / 1,000 = 1.10 TVPI = DPI + RVPI = 0.40 + 1.10 = 1.50
Cross-check with the other TVPI route: (400 + 1,100) / 1,000 = 1,500 / 1,000 = 1.50. Both give the same answer, as they must.
Option 2 swaps DPI and RVPI - a common slip. Remember that D is for Distributed (money that has actually come back) and R is for Residual (value still sitting inside the fund as an estimate).
3.Fund ABC ends its life with a TVPI of 2.05, having distributed nothing until the final year. Fund XYZ ends with a TVPI of 2.01 but distributed from its second year onward, with its RVPI still rising each year. Which fund does the workbook conclude is superior for long-term investing, and why?
- a)Fund ABC, because a higher final TVPI always indicates better fund management
- b)Fund XYZ, because consistent distribution decreases market risk for investors while delivering a comparable multiple
- c)Fund ABC, because deferring distributions maximises the compounding available to investors
- d)Neither - the funds are identical because the difference in TVPI is not statistically significant
Show the answer
Answer: (b) Fund XYZ, because consistent distribution decreases market risk for investors while delivering a comparable multiple
Fund XYZ is the superior fund, despite the lower final TVPI. The workbook's reasoning: XYZ distributed assets from year 2 onward, this did not damage its performance (its RVPI kept rising through years 2, 3 and 4), and consistent distribution decreases the market risk for the investors in the fund.
Money distributed is money out of harm's way. Money still carried as RVPI is an estimate by a valuer on an unlisted portfolio - it may or may not materialise. Since the difference in final TVPI is minimal (2.05 against 2.01), the risk difference decides the question.
The workbook adds the boundary condition: only if ABC's TVPI had been substantially higher would the choice have properly fallen back on the investor's own risk-return profile and time horizon.
This is the standing warning against ranking funds on TVPI alone - always read DPI, RVPI and TVPI together.
Where this is taught
Free preparation for NISM Series XIX-DRelated terms
- Net Asset ValueThe net assets of a mutual fund scheme divided by the number of units outstanding — what one unit of the scheme is worth on a given day, after every liability except the unitholders' own.
- DrawdownThe process by which the manager calls committed capital from investors as investment needs arise, following the capital call schedule agreed in the contribution agreement.
- J CurveThe shape of an AIF's return over its life - negative in the early vintage years because fees are charged before any exits, then rising through the maturity and harvest years.
- Multiple on Invested CapitalTotal realised and unrealised returns divided by total invested capital.
- Residual Value to Paid-in CapitalAssets under management divided by total capital contributions - the unrealised multiple, more representative of future returns early in a fund's life, but only an estimate dependent on valuation methodology.
- Total Value to Paid-in CapitalA fund's investment multiple: cumulative distributions plus the residual value of unsold investments, divided by paid-in capital — equivalently, DPI plus RVPI.
- Internal Rate of ReturnThe rate at which the present value of cash outflows equals the present value of inflows.
- Economic Internal Rate of ReturnThe IRR of a project widened to include the direct and indirect economic benefits it creates, whether or not they reach the fund — as distinct from the financial IRR the fund actually earns.