A Dark Room is where a film is turned into clear pictures. In the DaRC Room, the risk-reward profile of private capital funds becomes immediately visible and finally intelligible within modern arbitrage pricing frameworks.
The DaRC Room is where data about cash flows and NAV of private capital funds are turned into meaningful information, clearly comparable to the performance of all other asset classes.
The DaRC is a new, time weighted measure of the performance of private capital funds that overcomes the limitations of the money weighted standards currently in use. DaRC is an acronym and stands for Duration adjusted Return on Capital.
The DaRC is a patented methodology that uses the duration framework typically used for the valuation of fixed income securities to measure the performance of private capital investments.
Ultimately, private capital investments can be described as extreme forms of fixed income securities, with investment flows and distributions both uncertain but somehow bound as for timing and amount.
In particular, the investments in private capital funds share with those in fixed income securities the characteristic of the targeted (and hopefully satisfactory) self-liquidation of the underlying obligations, within a contractually pre-determined maturity.
Distributions have the effect of slowing until they almost stop the ticking of time, smoothing investment risk (and effectiveness) and causing re-investment risk.
The self-liquidation is the critical element that requires a level oh handling care that is not guaranteed by the current dollar-weighted IRR and cash-on-cash standards as well as it is by using a duration (i.e. time weighted) framework.