Why have LPs shifted attention from IRR to DPI in recent years, and what does that change for how a sponsor manages the portfolio?

IRR is manipulable and unrealized: subscription-line timing games inflate it, and it counts paper marks as if they were money. In the post-2021 environment — few IPOs, slow M&A, stretched holding periods — funds showed healthy IRRs on unrealized marks while returning little cash. LPs, squeezed by the denominator effect and needing distributions to fund commitments elsewhere, refocused on DPI: distributions to paid-in capital, cash actually returned. 'You can't eat IRR' became the industry line. Consequences for sponsors: exit discipline beats mark management — a decent sale that returns cash may serve the franchise better than defending a high carrying value; tools that generate genuine liquidity (partial sales, dividend recaps where leverage allows, minority stake sales) gain importance, while NAV-loan-funded distributions get scrutinized as fake DPI; fundraising narratives now lead with realized track record, and funds with low DPI in older vintages struggle to raise successors regardless of IRR. In portfolio reviews, expect the honest question per asset: what is the realistic path to cash, and when?