What are gross and net returns?

Gross figures are higher and are often quoted for single deals or a manager’s track record. Under the SEC marketing rule, a registered adviser that shows gross performance in an advertisement must also show net performance. Both are commonly stated as an IRR or a multiple, and comparing one fund’s gross figure with another’s net figure overstates the first.

Say a fund’s investments turn $100 million into $200 million, a gross gain of $100 million. After $15 million of fees and expenses and $17 million of carried interest, investors keep a net gain of $68 million. Simple example. Terms vary by fund.

Net is what investors actually receive, and the gap between gross and net shows what the fund cost them.

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