Interactive Tool
Hold Period IRR Impact
Demonstrate the time value of money: see how holding a static-yielding asset for longer periods inherently degrades the Internal Rate of Return (IRR) due to compounding mechanics.
IRR Degradation Curve
| Hold Period | Calculated IRR | Total Profit (Multiple) |
|---|---|---|
The Takeaway
- The IRR Trap: Notice that as the hold period increases (e.g., from 3 to 10 years), the IRR drops significantly, even though the total absolute profit (equity multiple) increases.
- Sponsor Behavior: This mathematical reality is why US fund managers are highly incentivized to sell assets quickly (years 2-4)—it juices the IRR, which triggers their performance bonuses (the promote), even if holding longer would generate more total cash for the investor.
- Our Approach: Direct investing allows Qatari capital to choose longer hold periods for generational wealth preservation, prioritizing steady yield and total equity multiple over artificially inflated, short-term IRRs.