The power of IRR is that it makes returns comparable across wildly different timelines. A 3x return sounds the same in both cases, but a 3x in 2 years is about a 73% IRR, while a 3x in 10 years is only about 12%. Time is doing the work: getting your money back faster lets you redeploy it, and IRR captures that. This is why the same MOIC can represent a phenomenal investment or a mediocre one depending on how long the capital was tied up.
IRR has real quirks worth knowing. It's highly sensitive to timing, so a single early distribution can inflate it dramatically, and very young investments can show absurd IRRs (or none at all) because there's barely any time in the denominator. It also assumes you can reinvest returns at the same rate, which is rarely true. Because real portfolios have irregular cash flows — checks going out on different dates, distributions coming back unpredictably — the honest way to compute it is XIRR, which uses actual dates rather than assuming neat annual periods. Treat IRR as one lens among several, best read next to MOIC and DPI.