## What is TVPI?

The **Total Value to Paid-In Capital (TVPI)** ratio compares the distributions returned to investors by a fund and the residual value not yet realized relative to the contributed paid-in capital.

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## How to Calculate TVPI Multiple

TVPI, shorthand for the “Total Value to Paid-In” capital multiple, is a metric used to measure the returns performance of a fund.

Formulaically, the TVPI multiple is the ratio between the total value of the fund’s realized distributions and unrealized holdings, compared to the paid-in capital from the limited partners (LPs).

- Total Value → The cumulative distributions to LPs (i.e. realized profits) and the residual value (i.e. unrealized potential profits)
- Paid-In Capital → The committed capital from LPs that have been “called” by the fund, i.e. paid-in by the LPs.

From the perspective of the investor, the TVPI answers, *“How does the firm’s total realized and unrealized profits compare to the initial paid-in capital amount?”*

Calculating the TVPI is relatively straightforward as it involves comparing the total value —i.e. realized profits and unrealized potential profits of the fund – relative to the capital contributed by the investor.

Therefore, to calculate TVPI, the total realized distributions to date and the estimated fair value of the remaining investments within the fund’s holdings are divided by the capital contributed to the fund to date.

**Cumulative Distributions**→ The total amount of capital returned to the LPs by the fund to date.**Residual Value**→ The residual value is the estimated value of the fund’s current holdings and is often referred to as the net asset value (NAV).**Paid-In Capital**→ The paid-in capital – i.e. the denominator in the TVPI multiple – represents the capital called and contributed by the LPs to the fund.

## Paid-In Capital vs. Committed Capital: What is the Difference?

While funds raise capital from LPs, the capital is not provided to the general partners (GPs) immediately.

The GPs must make a capital call to the LPs to request the committed capital.

Hence, the paid-in capital of an LP increases over the lifespan of the fund as the LPs contribute more of their committed capital.

The important takeaway here is that paid-in capital is NOT the same concept as committed capital.

## TVPI Formula

The formula for calculating the total value to paid-in capital multiple (TVPI) is as follows.

**TVPI =**(Cumulative Distributions

**+**Residual Value)

**÷**Paid-In Capital

The TVPI formula, as expressed above, is the ratio between the sum of a fund’s cumulative distributions and residual value to its paid-in capital.