All exits, including failures, should be shown in compiling an IRR. Quoted returns and projections should exclude tax reliefs. If the manager wants to also include tax reliefs to show total returns, the figures should be clearly differentiated.
For profitable exits, the actual pay out, net of performance fees should be the ones shown. The manager should make clear whether or not this is the case. If there has been a change in investment strategy, performance figures should be shown pre and post the change.
Company valuations should either be based on the price of the last investment, or on a valuation approach that meets IPEV guidelines. The fund manager should publish details of the valuation methodology they are using and the frequency of valuations, allowing for the different capital requirements of SEIS, EIS and scale up funds. If there has been no further funding or valuation for 2 years, then an explanation should be provided.
The transparency of the number of failures, average length of holding and amounts should be shown. The frequency and consistency of exits should be shown, and how this is in line with the approach set out by the fund manager. Visual timelines produced by some managers are helpful.
Where investments into a company have been made at different times, on exit a range of returns should be shown, rather than just the best one at a particular point in time. Where annual management charges have been accrued by the Manager, and are still payable by the investor, fund by fund performance should be shown net of this cost.
Managers are expected to communicate whether returns and valuations over time are in line with the initial marketing material.
Source: EISA Research, Education and Marketing Committee – December 2021: via IFA/GBI Magazine’s Tax Efficient Investment Research Report 2025
