Performance and reporting

Gross versus net returns

Also called Fee drag, Net of fees and carry.

Definition

Gross versus net returns is the distinction between performance measured on a fund's investments before management fees, partnership expenses and carried interest, and performance measured on the cash limited partners actually paid in and received after those costs. The difference between the two is the total cost of the fund to its LPs.

Updated October 9, 2026Checked against our editorial standards

Example

A fund calls $100M from its LPs over its life. $85M goes into companies and $15M covers management fees and partnership expenses. The companies return $255M, a gross multiple of 3.0x on invested cost. Carried interest is 20% of the profit above the $100M paid in: 20% of $155M, or $31M. LPs receive $255M less $31M, or $224M. The net multiple is 224 / 100, or 2.24x. The same portfolio is 3.0x gross and 2.24x net, and the 0.76x of difference is fees, expenses and carry.

Confused with

MOIC and TVPI. MOIC is usually the gross figure, measured on invested cost at the deal level. TVPI is the net figure, measured on paid-in capital at the fund level. A deck that shows MOIC beside a competitor's TVPI is comparing different things.

Net of fees but before carry. Some presentations label a figure "net" when it deducts management fees but not carried interest. The LP's net return is after both.

In practice

Prior performance in a PPM is where the two figures get tested. A registered adviser's marketing rule requires that any gross performance figure in an advertisement is shown alongside the net figure with at least equal prominence, and LPs ask for the cash flows behind both.

Sources

SEC Marketing Rule, Advisers Act Rule 206(4)-1www.ecfr.gov/current/title-17/chapter-II/part-275/section-275.206(4)-1

Related terms

Management feeThe management fee is an annual charge paid by the fund to the management company, typically 2% of committed capital during the investment period, often stepping down afterwards to a lower rate or a basis of invested capital, to cover salaries, rent and the cost of running the firm.
Carried interestCarried interest is the general partner's share of a fund's profits, typically 20%, paid through the distribution waterfall only after limited partners have received their contributed capital and, usually, a preferred return.
MOIC (multiple on invested capital)MOIC, multiple on invested capital, is the total value of an investment, realised proceeds plus the current value of what is still held, divided by the capital invested in it.
TVPI (total value to paid-in capital)TVPI, total value to paid-in capital, is the sum of distributions to limited partners and the current net asset value of the fund, divided by the capital LPs have contributed.