Happy Thursday and welcome back from SuperReturn,

This week’s main story started with a slightly uncomfortable realization.

For years, I’ve been a quiet skeptic of monitoring. Not because it isn’t important, but because most monitoring activities seem to change absolutely nothing. Most quarterly reports don’t lead to action. Most update calls don’t change a decision.

I thought that meant monitoring wasn’t creating much value.

I now think I had it backwards.

This week’s main story is about why the purpose of monitoring isn’t to generate insights from every report, but to identify the small number of situations that deserve your attention.

Further down, I also share a shorter observation from the software world. More than once recently, I’ve heard potential clients tell me that FundFrame looks almost too easy to get started with. Which led me to think about why so many of us mistake complexity for quality.

Enjoy the read,

Steffen

In both examples below, we were relying on remembering conversations that had happened years earlier. Without a system, that knowledge is often buried in someone’s OneNote folder, email archive, or memory. With a system, it becomes institutional memory.

Looking back, that was one of the reasons I got so much value from our investment CRM as an LP. Not because it helped us store information, but because it helped us connect dots over time.

FundFrame Pulse helps LPs manage GP intelligence, meeting notes, and pipeline activity in one place. You can learn more here.

Just before SuperReturn, I was invited to a webinar by European Emerging LPs. During the webinar, I had an insight I’m almost ashamed to share.

I’ve spent most of my LP career as a quiet skeptic of monitoring.

Not the idea of it - of course you should know what’s happening inside the funds you’ve committed to. My skepticism was more practical: I sat through hundreds of update calls and read thousands of quarterly reports, and most of them changed exactly nothing about what I did next.

The fund was doing fine. Or it wasn’t, and there was nothing I could do about it anyway. Most quarterly reports changed nothing. Most update calls changed nothing. Most AGMs changed nothing. Monitoring felt like a tax we paid for the privilege of having already made the decision.

Looking back, I think I was asking the wrong question.

I was asking whether monitoring created value every quarter.

The better question is whether every fund deserves the same amount of attention.

Or in other words: If I’m lucky, I’m investing in a GP that “buys low” and has value from day one. But I expect them to create most of the value during ownership and operational value creation. As an allocator, I create most of my value on day zero, when signing the subscription documents.

So when LP monitoring landed on the agenda for a webinar I did recently, I built the slide myself. Two examples of where monitoring had created value.

And then, somewhere in the middle of presenting my own slide, I heard myself say out loud:

“I’m actually more pro on monitoring now.”

Because I’d just talked myself into a position I’d spent a decade going back and forth on.

We had a fund that looked good on paper. Strong TVPI, healthy marks, the kind of report you skim and feel fine about.

But our monitoring let us see why it looked good. The write-ups weren’t being driven by the actual numbers. The companies were standing still while the marks walked uphill.

We raised it with the GP. They had answers, and the answers were reasonable. The revenue was coming. The integration was on track. The synergies would show up in the numbers soon.

Fair enough.

A year later, they started fundraising. We started our work, expecting it to end up in a re-up.

However, the marks were still written up. The expected performance still hadn’t arrived. And when we asked, we got the same answer we’d gotten twelve months earlier.

That was the moment the earlier meeting paid off.

Not because our diligence revealed some hidden truth. But because our monitoring and diligence, together, told a weaker story.

We didn’t re-up.

But the important point is this:

If we hadn’t had that conversation a year earlier, we almost certainly would have re-upped.

It was only when we heard the same answer twice, a year apart, with nothing underneath it changing, that it stopped being an explanation and became a signal.

The second example didn’t look bad on paper either.

The fund was marked above cost. By NAV, it was a gain.

But we were nearing the end of the investment period, and we had a growing conviction that something was off.

One of my former colleagues led the work here, and deserves the credit for what happened next.

So we did the one thing monitoring is actually for: we paid more attention.

We increased our scrutiny, went back to the GP, asked the uncomfortable questions. Nothing they said gave us comfort. If anything, the answers deepened the concern.

At that point we made a decision that costs money and requires admitting you might be wrong.

We hired an advisor to take the position to the secondary market. It did not go smoothly. More than a hundred potential buyers were contacted, and almost all of them passed.

But one didn’t.

And as the old saying goes, it only takes one buyer.

We sold at a discount to NAV - which, because the fund was marked above cost, still got us our money back. That fund was liquidated a few years later at less than 0.3x.

The swing on that single decision was close to 10% of our annual commitment program. But I won’t dress this one up.

The thing that made it work wasn’t a brilliant model or a clever structure.

It was that we recognized this was no longer a routine monitoring exercise. It was one of the few situations that deserved disproportionate attention.

My colleague did an excellent job.

We picked the right advisor who knew a new entrant into the secondary space.

That was our luck.

Saying it out loud forced me to see something I’d had backwards for a decade.

I’d been judging monitoring by whether each report created value.

By that standard, monitoring is a terrible use of time.

Most quarterly reports don’t change a decision. Most update calls don’t reveal anything new. Most funds are doing roughly what you expected them to do.

And that’s perfectly fine.

The mistake is expecting the 95% to justify itself.

It can’t.

Ninety-five percent of the funds you monitor, in any given quarter, will give you nothing actionable.

Because, in isolation, they probably are.

The value comes from the remaining 5%.

Not because those situations occur often. Quite the opposite.

The value comes from identifying them early enough that you can spend your time there.

That’s what happened in both examples.

The marks that wouldn’t move weren’t a problem because of one report. They became a problem because we paid attention long enough to notice a pattern.

The secondary sale didn’t happen because we monitored the fund. It happened because monitoring convinced us the fund deserved far more attention than the average position.

And increasingly, I think that’s what good monitoring actually is.

Not an information exercise.

An attention-allocation exercise.

The goal isn’t to spend equal time on every fund. The goal is to spend as little time as possible on the 95% so you have enough time for the 5%.

Because every hour spent discussing a healthy fund is an hour not spent understanding a troubled one. Or meeting a new manager. Or underwriting a future commitment.

That’s the trade-off I had backwards for years.

I thought the purpose of monitoring was to generate insights.

Increasingly, I think the purpose of monitoring is to tell you where to spend your attention.

And attention is probably the scarcest and most important resource an allocator has.

More than once, a potential client has told me that FundFrame looks almost too easy to get started with.

And interestingly, they didn’t mean it as a compliment.

There seems to be an assumption in parts of our industry that serious software arrives as a major project. Months of configuration. Endless workshops. Steering committees. If onboarding is quick, surely the system can’t be sophisticated enough.

I understand the instinct. I used to think the same way.

A difficult rollout feels important. A complicated implementation feels enterprise-grade. But a lot of that configuration isn’t really built for you. It’s built around years of customisation that can make changing systems surprisingly expensive.

I've been on the buyer's side of one of these. I remember the relief when it finally worked far more clearly than I remember the software being good.

Good software shouldn’t be judged by how good it feels when the project ends. It should be judged by how useful it is once the work begins.

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.