For most of the last decade, private equity performance was a conversation about IRR. Internal rate of return is a useful metric, and the industry got very good at presenting it favorably. Subscription credit lines pull capital calls forward, compressing the denominator. Continuation funds extend hold periods on assets still marked at attractive valuations. NAV financing generates distributions that look like realizations but are backed by debt rather than actual exits. None of these are illegitimate in isolation. Together, they produced a reporting environment where IRR told you quite a lot about how sophisticated a firm’s treasury function was, and rather less about whether investors were actually getting their money back.
That gap has become impossible to paper over. The data from 2026 is unambiguous on this point. At SuperReturn this year, the dominant theme across LP panels was a single demand: distributions. Not marks. Not projected returns. Cash. The phrase “DPI is the new IRR” had apparently become common enough that it was printed on merchandise at the conference, which is either a sign that the idea has arrived or that it has already been captured by the people it was meant to critique.
DPI, distributions to paid-in capital, is a harder number to engineer than IRR because it requires an actual exit. You have to sell something, and the price you receive has to clear the market, not just satisfy a quarterly valuation model. For many funds from the 2018 to 2021 vintage, the honest answer to whether the fund has returned more than it took in is: not yet. That’s not a catastrophic outcome for every one of those funds, but it is a problem when successor fundraising depends on an LP base that has been waiting years for distributions while remaining overallocated to the asset class.
The structural shift underway is worth taking seriously. Firms demonstrating strong DPI raised quickly in the first half of 2026, while others faced extended timelines, reduced targets, and increasingly skeptical LP investment committees. That bifurcation is likely to deepen rather than resolve, because the assets still waiting to exit aren’t getting younger. More than half of buyout-backed portfolio companies globally have been held for more than four years, the highest figure on record. Working through that backlog, even in an improving exit environment, is going to take time that many managers are running out of.
What this reshapes, beyond fundraising dynamics, is how LPs evaluate the firms they want to stay with. Track record in private equity has historically been a backward-looking exercise measured in IRR. Increasingly it is being measured in something closer to operating credibility: did this firm build businesses that could actually be sold, at prices that reflected genuine value creation, on a timeline that served its investors? That’s a more demanding standard. It’s also a more honest one.
For firms that have always operated with that standard in mind, the environment is clarifying rather than threatening. The market is moving toward them. For firms that built their reputations on marked-up portfolios and engineered return metrics, the next few years are going to be a more uncomfortable test than any they have faced before.
