Ratz IRR: Performance Measurement in the Absence of Cash Flow Data

Posted: 6 Dec 2015 Last revised: 22 May 2019

See all articles by John Renkema

John Renkema

APG Asset Management

Rob van den Goorbergh

APG Asset Management

Carlos Garcia Rivas

PGGM Investments

Date Written: December 4, 2015


In this paper we introduce a methodology to estimate the portfolio IRR from portfolio constituents, when only the IRR and the money multiples of the constituents are available. We call this methodology RATZ IRR (reconstructed average time zero internal rate of return). There will be a deviation from the true portfolio IRR, as not all cash flow information is available. We show the analytical expression of the difference between the RATZ IRR and the time zero portfolio IRR. We show empirical evidence of the quality of the estimator using a proprietary data set from a large private equity investor. Furthermore, we present an application of the RATZ IRR, through comparing the private equity portfolios of several large US public pension plans.

Keywords: Private Equity, Performance, Performance Measurement, IRR, Internal Rate of Return

Suggested Citation

Renkema, John and van den Goorbergh, Rob and Garcia Rivas, Carlos, Ratz IRR: Performance Measurement in the Absence of Cash Flow Data (December 4, 2015). Journal of Alternative Investments, Forthcoming, https://doi.org/10.3905/jai.2017.20.2.051, Available at SSRN: https://ssrn.com/abstract=2699168 or http://dx.doi.org/10.2139/ssrn.2699168

John Renkema (Contact Author)

APG Asset Management ( email )

Gustav Mahlerplein 3
Amsterdam, 1082 MS

Rob Van den Goorbergh

APG Asset Management ( email )

P.O. Box 75283
1070 AG Amsterdam

HOME PAGE: http://www.apg.nl/apgsite/pages/english/

Carlos Garcia Rivas

PGGM Investments ( email )

Utrechtseweg 44
P.O.Box 117
Zeist, 3700 AC

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