What aspect of private equity does 'cash-on-cash returns' measure?

The concept of 'cash-on-cash returns' specifically measures the amount of capital that is returned to investors in relation to the cash they have originally invested in a private equity fund. This metric is crucial for investors as it allows them to assess the actual cash profits generated by their investment relative to their initial cash outlay.

Cash-on-cash returns are calculated by taking the total cash distributions received from the investment and dividing it by the initial cash invested, which provides a straightforward way to understand how effectively the investment is performing in generating actual returns. This focuses exclusively on the cash flow aspect of an investment, disregarding other variables such as valuations or unrealized gains, thus providing a clear view of investment performance in terms of liquidity and cash generation.

In contrast, the other choices do not encapsulate this specific measurement accurately. Total profits made by the fund can include unrealized gains, which does not reflect the actual cash received. Overall market trends in private equity evaluate broader market conditions rather than individual investment performance. The fees charged by the General Partner relate to the costs associated with managing the fund and do not pertain to the returns generated to investors.