This paper by Ludovic Phalippou critiques the widespread use of since-inception Internal Rate of Return (si-IRR) to assess private equity performance. Phalippou argues that si-IRR is misleading, significantly inflating perceived returns and driving excessive capital allocation to private equity. He demonstrates how si-IRR is highly sensitive to early cash flows, susceptible to manipulation, and not a true rate of return, unlike calculations in public markets. The author proposes using horizon IRRs – returns calculated over fixed periods (e.g., 5, 10, 15 years) – as a more accurate and less manipulable alternative, while acknowledging limitations even with this approach. Ultimately, the paper aims to expose…Read the postAI does my IRR paper