Return Profile (Investment Return Profile)
The expected return characteristics and risk parameters of an investment opportunity or portfolio.
Definition
Return profile describes the range of potential investment outcomes, including expected returns, timeline, risk levels, and probability distribution. It helps investors evaluate whether an opportunity aligns with their risk tolerance and return requirements.
Key Components
Target Returns: Expected IRR or multiple of invested capital
Time Horizon: Expected investment duration until liquidity
Risk Level: Probability of loss and variance of outcomes
Liquidity: Ability to exit investment before maturity
Example
Venture Capital Return Profile: Target 3-5x returns over 5-7 years, high risk with 60% loss rate, 30% modest returns, 10% high returns driving portfolio performance. Illiquid investment requiring long-term commitment.