AIF Returns in India: How to Verify What a Fund Reports

A target return is an objective stated at fundraising, not a result — and treating the two as interchangeable is where most performance-related disappointment in AIF investing actually begins. A gross fund IRR quoted in a pitch may exclude investor-level management fees, carried interest and applicable taxes entirely, while interim NAV growth may rely heavily on valuations of portfolio companies or loans that have not actually been sold or repaid.

Verification begins with a simple discipline: before accepting any performance number at face value, identify exactly what it represents — gross or net, realised or including unrealised marks, fund-level or attributable to one standout deal.

Always ask whether a quoted performance figure is gross or net of fees and carry, whether it is measured at the fund level or cherry-picked from a single deal, and whether it covers since-inception performance or a favourably chosen shorter period — each of these framing choices can make the same underlying fund look meaningfully different.

Read IRR together with TVPI and DPI, because each answers a different question. IRR reflects the timing and magnitude of cash flows and is highly sensitive to when capital was called and returned. TVPI (Total Value to Paid-In) shows total value — realised plus unrealised — relative to capital contributed. DPI (Distributions to Paid-In) shows only the cash actually distributed back to investors, which is the number least susceptible to optimistic valuation assumptions.

Compare only within the same vintage year and strategy, since a 2018-vintage venture fund and a 2022-vintage one operate in entirely different market conditions. Public-market CAGR is also not directly comparable with cash-flow-based private-market IRR — the two metrics answer structurally different questions and need to be reconciled with care, ideally using a public-market-equivalent (PME) methodology, before drawing conclusions.

Subscription lines of credit — short-term borrowing a fund uses to delay calling investor capital — can artificially inflate a reported IRR by compressing the time between when capital is 'used' and when it shows a return, without changing the underlying investment performance at all.

A strong TVPI paired with a low DPI is a specific warning sign: it means most of the reported value still exists only on paper, in unrealised, manager-marked positions, rather than as cash actually returned to investors.

A fund family's median or 'flagship' performance claim can conceal wide dispersion between individual schemes or vintages within that same family — ask specifically about the scheme being offered to you, not the family's best-performing vehicle.

Before acting, answer five questions in writing: request cash-flow-level performance data where the manager is permitted to share it, rather than accepting summary IRR alone; reconcile total capital called against total distributions received to date; explicitly separate realised value from unrealised, manager-marked value; review the fund's valuation methodology and how frequently an independent valuer, not just the manager, reviews the marks; and ask directly about the manager's predecessor fund's loss cases, not only its winners.

The most reliable performance story is one where every quoted return number can be traced back to actual cash flows and to valuations reviewed by someone other than the manager reporting them.