What does the Multiple of Money (MoM) measure in private equity?

The Multiple of Money (MoM) is a key metric used in private equity to evaluate the performance of an investment. It specifically measures the total cash that has flowed into an investor’s account (total inflows) relative to the total cash that has been invested or contributed (total outflows). This ratio helps investors gauge how many times their initial investment has multiplied over time, providing a clear view of the overall return on investment.

By focusing on both inflows and outflows, MoM offers a straightforward analysis that is easy to understand and communicate. It captures the complete picture of investment performance, making it an essential tool for investors to assess whether their capital has been working effectively.

The other options do not accurately describe what MoM measures. The measure of years an investment is held provides insight into the duration of the investment but does not reflect its financial performance. The total investment plus additional expenses relates to the cost structure of an investment rather than its performance. Lastly, net gains from a single investment only reflect profitability without offering a comparative measure against how much was initially invested. MoM, therefore, stands out as the most comprehensive approach to understanding returns in private equity.