Estimate Internal Rates of Return without burdensome cash flow spreadsheets.
Module Category: Analysis Tactics and Techniques
Key Concept: The Effective Holding Period or Effective Hold (Δt’) is a dollar weighted duration that accounts for all the inflows and outflows occurring during an ownership period. It allows analysts to calculate an “Effective IRR”. For individual deals, this is an “annualized” measurement of value drivers like EBITDA Growth and Multiple Expansion, called a Value Creation IRR. For groups of investments (e.g., real or hypothetical Funds), this can estimate a portfolio’s Net IRR without requiring any time series cashflow data.