Happy Thursday and welcome to another edition of Beyond TVPI.

One of the GPs I invested with had a small habit I always admired. Every document said who had prepared it, when it was prepared and, where relevant, who it had been prepared for.

This week, I look at why that convention became more useful as the documents aged and what it can teach investment organisations about preserving the history behind their data.

It is also the idea behind a feature we recently added to FundFrame.

As always, if you have questions or comments, please hit reply and let me know.

Enjoy the read,

Steffen

One of the GPs I invested with did something on almost every document they produced that I always thought was unusually smart.

On the cover page, they wrote who had prepared the document, when it was prepared and, where relevant, who it had been prepared for.

That was it.

It was a small administrative detail, handled manually. Yet every document arrived with enough context to understand where it had come from.

The habit became more valuable as the documents aged.

Documents in institutional investing tend to live much longer than the projects that created them.

A sector deep dive may be opened a year later by an associate working on something else. An investment memo may be reopened two years after the commitment. Someone may want to understand an assumption in an old model. A new team member may inherit responsibility for a fund. A portfolio manager may find a number that conflicts with the current report.

The GP’s cover page gave you a place to start.

You could see who had prepared the work and when.

That saved time. It also showed the reader where to go for more information. You avoided asking 10 or 20 people, “Do you know who worked on this?” - or worse, not finding out at all.

Side note: We immediately implemented this at my firm.

Investment teams accumulate an enormous amount of knowledge.

It sits across investment memos, models, meeting notes, portfolio reports, emails, databases and individual people’s memories.

Most systems are designed around the current state of an investment. They show the latest valuation, ownership percentage, rating or expected fundraise date.

Reconstructing how the organisation arrived there is often much harder.

Who changed the number? When did they change it? Was the update a correction, new information from the GP or a change in the team’s judgement?

The answers can matter as much as the current value.

A valuation revision entered after receiving a quarterly report has a different meaning from one made because an analyst found an error. A manager rating changed after a reference call carries different information from one updated during a routine database clean-up.

The value alone cannot explain those differences.

The history belongs in the investment record.

Auditability is the obvious use case for an audit log. Its day-to-day value is more practical.

Someone questions a number shortly before an IC meeting. A visible history shows when it changed and who made the update.

Responsibility for an investment moves to another team member. The new owner can review how the organisation’s view developed over time.

Two people remember an assumption differently. The record provides a common starting point for resolving the disagreement.

These are ordinary situations in a long-term investment programme. Private market investments remain in a portfolio for 10 years or more, while teams, responsibilities and systems change around them.

Ten years ago, we committed to Arlington Fund IV. That fund is still active. I’ve changed jobs twice since, and none of the people who were there when that investment was made are still at the firm.

A reliable history allows the team to resolve basic questions quickly and return to the investment decision in front of them.

Related: The same principle applies to qualitative information. Institutional memory allows you to compare what a manager said several years ago with what eventually happened: https://www.beyondtvpi.com/p/the-gap-between-what-they-said-and-what-happened

We recently added a full audit log to FundFrame. Every change made in the platform now creates a record showing what changed, who changed it and when. Users can follow the evolution of the information held in the system.

A new customer’s compliance team required it. The feature also reflects the same discipline I saw in that GP’s documents.

The GP made the context explicit when the document was created. FundFrame keeps that context attached as investment data evolves.

Over the life of a private market investment, individual data points will be revised many times. People will change roles. New team members will take responsibility. Decisions made today may need to be understood years from now.

Good investment infrastructure keeps that history available throughout the life of the investment.

Ten years later, whoever inherits it should still be able to see how the organisation arrived at its current view.

Yesterday, we had the FundFrame team and their families over for a BBQ.

Naturally, it poured with rain.

We still managed to eat, the children found ways to entertain themselves, and nobody suggested moving the event to Microsoft Teams.

In previous companies, I always enjoyed being invited to the founders’ homes, so it was nice to continue the tradition - this time as the host.

When the company is small, I think it is valuable to know the partners and children of the people you work with.

They are also the ones making room for customer trips, late meetings and the occasional startup emergency.

It was a lovely night, despite the Danish weather.

And we’ll do it again.

This newsletter is written by Steffen Risager, the founder of FundFrame, a platform for LPs to manage their private markets investments.

Before that, Steffen was CIO at Advantage Investment Partners, a Danish Fund-of-Funds.

Steffen has a decade of experience as an LP, and has made commitments totalling approx. $6bn across fund- and co-investments.