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.