MOIC
What is it?
MOIC stands for “Multiples on Invested Capital.” It is a metric used in private equity investing to evaluate the performance of an investment relative to the originally invested capital. MOIC is calculated by dividing the final value of the investment (i.e., the exit value or proceeds from the investment) by the capital initially invested.
This indicator is essential for private equity investors, as it provides a clear view of how much their investment has grown in relative terms, without considering the time elapsed or the internal rate of return (IRR). In simple terms, MOIC shows how many times the initial capital has been multiplied over the investment period.
Key aspects to consider
A MOIC of 2x, for example, means the investment has doubled in value—that is, the initial capital has generated an equal amount in return. However, MOIC does not account for time, and thus it is not a measure of annual profitability, unlike other metrics such as the internal rate of return (IRR). This makes it a more useful metric for evaluating the total return of an investment over its life, but insufficient on its own to assess the time-efficiency of the investment.
MOIC is widely used in private equity and venture capital, where investments typically have longer time horizons. It helps investors gain a general overview of returns without getting into the specifics of annualized performance.