What is the J-curve in fund performance?

The J-curve is the characteristic shape of a fund's returns over time: negative early — fees are charged while investments sit at cost or get marked down first — then rising as winners appear and exits arrive.

Young vintages therefore always look bad, and comparing a two-year-old fund's IRR to a mature fund's is meaningless. The curve is why LP reporting is read by vintage and why patience is structural in venture.