What Does Moic Stand for in Finance

MOIC Basics

Multiple on Invested Capital (or "MOIC") allows investors to measure how much value an investment has generated. MOIC is a gross metric, meaning that it is calculated before fees and carry. It can be calculated at the deal level or the portfolio level to evaluate the performance of both realized and unrealized investments. This metric is highly valuable for both deal level and portfolio analysis and reporting. MOIC is calculated by:

MOIC is important for performance reporting because of its simplicity. It is easy to understand that a multiple of 1.50x means that the principal investment amount has increased in value by 50%. This metric, which is directly tied to the dollar amount invested, is often a more digestible performance indicator than IRR. This is because MOIC simply accounts for the change in gross value and does not attempt to account for the amount of time required to do so. See below for an example:

Source: CobaltLP

For illustrative purposes only

Benchmarks

If you are familiar with our Benchmarking White Paper, you will realize that looking at MOIC on a standalone basis is not the only analysis that can be run. You may want to understand how an individual MOIC compares, or benchmarks, to other MOIC figures across your portfolio. You also need to understand how an individual MOIC compares to a peer set.

Technology solutions, like Cobalt LP, are providing this industry-level information to investors. Through the Cobalt LP platform, users are able to access Hamilton Lane's deal level benchmarks. These benchmarks allow LPs to compare how an individual MOIC compares to an industry-wide MOIC, which can be filtered by sector, geography and/or industry. See below for an example:

Source: Hamilton Lane Data via Cobalt LP

For illustrative purposes only

Learn more about the deal level benchmark data here.

Introducing the Total Value Curve

By simply looking at deal level MOIC, it's not always clear which investments are driving value at the portfolio level. For that, we need to take into account the amount of capital invested in each deal. An easy way to visualize this is through the Total Value Curve. The Total Value Curve shows whether positive performance is spread out across the portfolio or concentrated in a handful of deals.

The Total Value Curve is created by dividing the deal profit or loss by the total profit. More granularly, this is:

This can quickly become an arduous process when calculating across various groupings of deals. Technology solutions, such as Cobalt LP, can help streamline this process and make this analysis more accessible. With the Total Value Curve, LPs are able to easily determine the sources of outperformance in their deals. See below for an example:

Source: Cobalt LP

For illustrative purposes only

Key Takeaways

While nothing about MOIC is revolutionary, it's important to remember that sometimes the best way to talk about performance is in simple terms and to provide a very clear picture of how a fund is progressing. Through this post, you've been able to understand how:

• It clearly shows which investments are generating value.
• It's important to evaluate it in the context of the industry through applicable benchmarks.
• Analysis, such as the Total Value Curve, allows LPs to visually see what deals are adding or detracting value from the portfolio.

What Does Moic Stand for in Finance

Source: https://www.cobaltlp.com/blog/moic-private-equity/

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