There are numerous datapoints that, if included or omitted, can affect the internal rate of return (IRR) that a PE sponsor shows for a fund in its marketing materials. It is important not to overlook, however, how certain fundamental management practices can also skew IRR figures, even if all the inputs are faithfully and accurately calculated. Absent proper awareness and disclosure of those issues, the SEC could find that unduly misleading IRR calculations induced investors to commit capital to the sponsor under false pretenses. This three-part series describes nine scenarios in which PE sponsors can generate distorted IRR figures based on their fund management practices or calculation techniques. This overview is meant to help investors parse these issues to generate a more accurate picture of PE sponsors’ investment prowess, while also helping sponsors avoid SEC scrutiny for violating performance advertising rules. This second article details how the idiosyncrasies of secondary transactions and private credit funds can artificially inflate the IRRs of active funds, as well as issues associated with the use of subscription credit facilities. The third article will explain how sponsors can inadvertently generate IRR figures when attempting to curate the most favorable subset of investments for marketing purposes. The first article highlighted how IRR calculations can be manipulated when certain data inputs are omitted by sponsors. See “SEC Charges Fund of Private Equity Funds Portfolio Manager With Misleading Investors Concerning Fund Valuation and Performance” (Sep. 12, 2013).