What is the typical target range for IRR?

The Internal Rate of Return (IRR) is a key metric used to evaluate the profitability of investments, particularly in private equity, venture capital, and real estate. A typical target range for IRR often takes into account the risk profile and the expected return for the type of investment.

In many scenarios, target IRR values of 20-30% are seen as attractive, especially in higher-risk investment categories. This range reflects the expectation that more aggressive investments should yield higher returns to compensate for the associated risks. An IRR in this range indicates that the investment is likely to provide substantial growth and value over time, which aligns with the expectations of investors who are willing to navigate potential volatility.

The higher target IRR also matches the performance metrics commonly set by institutional investors and funds, which look for robust growth rates in their portfolios to justify their investment strategies. Thus, choosing a target IRR in the 20-30% range reflects both a good balance of ambition and the understanding of the market dynamics typical in growth-oriented investments.