Realised vs Unrealised AIF Returns

A realised return is cash actually distributed back to investors after an exit. An unrealised return is a paper mark-up on a position the fund still holds, based on the manager's own valuation methodology. These two are fundamentally different in reliability, and a fund's headline IRR often blends both without clearly separating them.

Ask for the exact split: what percentage of the fund's reported gain has actually been distributed as cash, versus what percentage exists only as an internal valuation of still-held positions. A fund several years into its life with a low realised percentage carries meaningfully more uncertainty than one with most gains already returned.

The common failure is treating a headline IRR as a settled fact when it is mostly unrealised. Unrealised marks can be optimistic, can be written down at the next valuation cycle, and have not yet survived the test of an actual sale to a real buyer at a real price.

Before relying on any performance figure, request: the exact realised-versus-unrealised split behind the headline IRR; the valuation methodology used for unrealised positions and how often it is revised; and how the manager's unrealised marks from earlier vintages ultimately compared to their actual realised exit values.

A fund's true performance is only fully known once a position is realised — until then, the unrealised portion is an informed estimate, not a fact.