Distributions to paid-in
Cash actually returned to LPs divided by the capital they have paid in.
Because it counts only cash already distributed, DPI is the most concrete performance measure. A DPI of 1.0x means LPs have their money back.
DPI starts at zero and rises only when the fund returns cash or stock to LPs. Slow exit markets in recent years have pushed LPs to focus on it, because valuations do not pay pensions or fund new commitments.
Managers can lift DPI through company sales, recapitalisations, secondary sales of stakes or continuation funds. LPs also ask how much of a manager's past DPI came from a single outcome.
Worked example
LPs have paid in $40M and received $20M back in distributions. DPI is $20M divided by $40M, or 0.5x. When distributions reach $40M the fund's DPI is 1.0x and LPs have their money back, and any further distributions are profit.
Common questions about DPI
Why do LPs focus on DPI?
Because it measures cash actually returned rather than estimated value. Many LPs need distributions to meet their own payouts and to fund new commitments, so a fund with high paper value but little DPI is harder to back again.
What is a good DPI?
By the end of a fund's life, a DPI above 1.0x means LPs got their money back and anything above about 2x is generally strong. Mid-life, LPs compare DPI against funds of the same vintage.