Pooled Internal Rate of Return can be defined as the collective calculation of the internal rate of return of a business entity running more than one projects. With the help of pooled internal rate of return the collective rate of return of a single portfolio is calculated by using different cash flows of different projects of the single portfolio. The cash flows that are used for calculating pooled internal rate of return are actually the individual cash flows of each project. A pooled cash flow is created with the help of individual cash flows and internal rate of return is then calculated with the help of this pooled cash flow.
The best usage of the pooled internal rate of return and the calculation of the pooled cash flow is in the case of a private equity that has a number of funds and it is important to calculate pooled cash flows. With the help of the pooled internal rate of return we can have an idea of the overall internal rate of rate of all the groups of the equity. Another useful advantage of pooled internal rate of return is that it can help in calculating the average rate of return of the equity. Thus the pooled internal rate of return gives a better picture of the overall performance of a an entity as compared to the average IRR.