The distribution rate for an LP report, the three ways it is computed, and what it says about when DPI reaches 1.0x.
Divide the distributions paid in the year by the fund's NAV at the start of that year. On an illustrative buyout fund that distributed 78.0 in 2025 from an opening NAV of 415.0, the distribution rate is 18.8 per cent, up from 8.2 per cent in 2023. Held at that rate, with 8 per cent annual value growth, the fund's DPI rises from 0.73x to 1.03x in two years.
Worked in full in Private Equity Investor Relations by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
When exits slow, limited partners stop asking about IRR and start asking when they will get cash back. DPI answers the question to date; it says nothing about speed. The distribution rate does: it is the share of the remaining portfolio the fund turned into cash in a year. LP pacing models are built on it, because a programme's ability to fund new commitments from old distributions depends on how fast NAV converts. An investor relations team that reports it, defined and reconciled, answers the question before it is asked and in the fund's own numbers.
| Year | Opening NAV | Calls | Distributions | Value change | Closing NAV |
|---|---|---|---|---|---|
| 2021 | 420.0 | 40.0 | 45.0 | 55.0 | 470.0 |
| 2022 | 470.0 | 25.0 | 60.0 | −10.0 | 425.0 |
| 2023 | 425.0 | 15.0 | 35.0 | 20.0 | 425.0 |
| 2024 | 425.0 | 10.0 | 52.0 | 32.0 | 415.0 |
| 2025 | 415.0 | 5.0 | 78.0 | 38.0 | 380.0 |
At the end of 2025 the fund has called 450.0 in total and distributed 330.0, 60.0 of it before 2021. DPI is 0.73x, RVPI 0.84x and TVPI 1.58x.
Distribution rateyear = distributions in the year ÷ NAV at the start of the year
Variant on average NAV = distributions ÷ ((opening NAV + closing NAV) ÷ 2)
Net rate = (distributions − calls) ÷ opening NAV
In Excel, with opening NAV in B and distributions in D: =D6/B6; for the five-year rate =SUM(D2:D6)/SUM(B2:B6)
| Year | On opening NAV | On average NAV | Net of calls |
|---|---|---|---|
| 2021 | 10.7% | 10.1% | 1.2% |
| 2022 | 12.8% | 13.4% | 7.4% |
| 2023 | 8.2% | 8.2% | 4.7% |
| 2024 | 12.2% | 12.4% | 9.9% |
| 2025 | 18.8% | 19.6% | 17.6% |
The opening-NAV rate is the one to headline: it is the value the cash came out of, and anyone can reproduce it from two numbers in the capital account. The average-NAV version moves around in years with large calls or value changes. The net rate answers a different question, how much cash the LP actually received after funding calls, and it is the one a treasury team plans with. Over the five years the fund distributed 270.0 against 2,155.0 of opening NAV, a pooled rate of 12.5 per cent.
To reach 1.0x DPI the fund needs another 120.0 of distributions; to reach 1.5x, 345.0. Project forward with one rule: each year the NAV grows 8 per cent and the fund distributes the rate times opening NAV. At 18.8 per cent that is 71.4 in 2026, 63.7 in 2027 and 56.8 in 2028, with DPI passing 1.0x in the second year at 1.03x.
| Distribution rate | Next year's distributions | Years to 1.0x DPI | Years to 1.5x DPI | DPI after 5 years | NAV after 5 years |
|---|---|---|---|---|---|
| 10.0% | 38.0 | 4 | 10 | 1.14x | 343.5 |
| 15.0% | 57.0 | 3 | 8 | 1.28x | 264.4 |
| 18.8% | 71.4 | 2 | 7 | 1.37x | 214.6 |
| 25.0% | 95.0 | 2 | 6 | 1.49x | 149.7 |
The difference between a 10 and an 18.8 per cent rate is two years to 1.0x and three to 1.5x. Note what a low rate means for the NAV: at 10 per cent the NAV barely shrinks, because 8 per cent growth refills most of what is paid out, and the fund's NAV half-life is 34.3 years. At 18.8 per cent the half-life is 6.1 years. A low rate on an old fund is therefore a statement about the term: the portfolio will not be realised inside it without a step-up in exits.
Give the rate for the last twelve months and for each full year since the fund entered harvest, on opening NAV, with the net rate beside it. Show the pooled figure over the period, 12.5 per cent here, rather than an average of annual rates, so that a large year is weighted by the NAV it came from. Then state the projection's two assumptions, rate and value growth, in the footnote. An LP can disagree with an assumption; it cannot rebuild a number whose definition it was never given.
Reporting distributions as a percentage of commitments or of paid-in capital and calling it a distribution rate. That is a DPI increment: 78.0 is 17.3 per cent of the 450.0 paid in, but that says nothing about how fast the remaining portfolio is converting, because it ignores how much is left to convert. The second mistake is putting a recapitalisation or a NAV-loan distribution in the same line as exit proceeds without a footnote. Both raise the rate without selling anything: the portfolio still has to be realised, now with debt ranking ahead of the equity.
A constant rate and constant growth are a simplification. Real distributions are lumpy and the rate tends to rise with fund age, which is the pattern the Takahashi-Alexander model builds in.
The distribution rate is distributions over opening NAV: 18.8 per cent for this fund in 2025, and enough to take DPI from 0.73x to 1.03x within two years at 8 per cent growth. Report it with its definition, beside the net rate, and show the projection it implies. The book's Appendix J reads one fund's numbers end to end, and the free workbook for the book computes them from one cash-flow schedule. See also what a good DPI is and how the Takahashi-Alexander model forecasts distributions.
It depends on the fund's age: a young fund distributes little of its NAV, a fund in harvest much more. Judge it against what the LP's pacing model assumed for that age and against the fund's own history. On the worked fund the rate rose from 8.2 per cent in 2023 to 18.8 per cent in 2025, which at 8 per cent value growth takes DPI from 0.73x to 1.0x within two years.
Opening NAV is the standard and the easiest to reproduce, because it is the value the distributions came out of. Average NAV gives a slightly different figure in years with large calls or value changes: 19.6 per cent instead of 18.8 for the worked fund in 2025. State the definition next to the number and keep it constant across reports.
DPI is cumulative: all distributions to date over paid-in capital. The distribution rate is the annual speed at which NAV is being turned into DPI. A fund at 0.73x DPI with 0.84x of NAV needs 120.0 more of distributions per 450.0 paid in to reach 1.0x; at an 18.8 per cent rate on a 380.0 NAV growing 8 per cent, that takes two years.
This article is one calculation from Private Equity Investor Relations. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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