Feb 21, 2009

Internal rate of return versus time-weighted return

IRR is primarily used by investors in private, non-marketable securities while TWR is more appropriate for mutual funds that invest in liquid, public securities. Since mutual fund managers can't control the timing of cash inflows and outflows, TWR presents a more accurate view of realized returns. IRR considers the timing and magnitude of cash flows, which private equity managers have control over. More details here.

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