What is the difference between IRR and MOIC?

MOIC tells you how many times your money you got back: if a fund invests $100M and receives $250M in total, MOIC is 2.5x. It says nothing about how long that took. IRR is the annualized return, the discount rate at which the present value of all cash outflows and inflows equals zero, so it captures timing.

With one investment at the start and one exit at the end, the conversion is simple: IRR equals MOIC raised to the power of one over the number of years, minus one. Doubling your money over three years is about a 26% IRR, while doubling over five years is about 15%. Same multiple, very different annual return.

Investors look at both because each can be flattering on its own. A quick flip can show a high IRR on a small multiple, which may not move the needle for a large fund. Returning cash early, for example through a dividend recap, raises IRR more than MOIC. A long hold can show a strong multiple with a mediocre IRR. Limited partners want a high IRR, but they also need real multiples of cash back, so funds report both.