Money-Weighted Return

Money-weighted return (MWR) is sometimes called the internal rate of return, or IRR — the single discount rate that makes the present value of all cash inflows equal to all cash outflows over a period. Unlike a time-weighted return, which strips out the effect of when money entered or left, MWR gives full weight to those decisions. If a family added a large sum just before a market decline, the MWR will reflect that pain in a way that other return figures may not.

This matters deeply to family offices because the family is often the one deciding when to invest additional capital — into a private equity fund, a real estate deal, or a new manager. A hypothetical family that committed a large allocation to a private fund at its peak vintage would see a very different MWR than the fund's own reported return. MWR makes that gap visible.

A common confusion is treating MWR and time-weighted return as interchangeable. They answer different questions. Time-weighted return measures a manager's skill independent of cash flows; MWR measures what the investor actually earned given the flows they controlled. Both belong in thorough performance measurement, and families typically review them side by side for a complete picture.