Happy Thursday and welcome to another edition of Beyond TVPI.

Today, I’m sharing three of my favourite charts for evaluating fund managers.

I use these - along with many other charts - in virtually every diligence process. Some are most useful early in the screening process, while others become more valuable once diligence is underway. Together, they help turn a manager’s track record and strategy into something easier to interrogate.

If you don’t already use these charts, consider this an invitation to borrow the ideas and incorporate them into your next diligence process.

Note: This article reads much better if you have images enabled. Otherwise, I recommend you view it in your browser on https://beyondtvpi.com.

All screenshots are from FundFrame.

The first chart shows how the manager has performed over time relative to its peer set.

The chart includes the median, first and third quartiles, as well as the top and bottom 5% of funds. Here, Funds I and II sit in the first quartile, while Fund III is more or less on the median.

I would describe this as a good, but somewhat unspectacular, track record. And if we are now evaluating a new fund, Fund III raises some obvious questions. What changed? Was the weaker performance a function of strategy, market conditions, portfolio construction, or something else?

Of course, I would not assess this chart in isolation. I would hold the TVPI performance up against DPI and IRR to understand how much value has actually been realised, and how quickly.

Some investors may prefer a variation with a more confidence-band-style presentation. The principle is the same: understand how the manager’s performance has developed over time and how it compares with the relevant peer set.

Another simple but useful chart shows the fund’s cash flows over time.

It tells me a great deal about what I can expect as an LP entering a new fund. Are contributions and distributions relatively smooth, or is the fund’s cash-flow profile more lumpy?

This is especially important because there are usually hundreds of cash-flow events in any given fund. Looking through them individually in Excel does not give me the same immediate understanding of the fund’s liquidity profile.

The shape of those cash flows helps me understand the liquidity risk embedded in the investment and how the fund might interact with the rest of the portfolio.

The graph here, with semi-annual cash flows, is relatively back-ended for a buyout fund.

Finally, a chart I’ve covered before - and probably my favourite chart as an LP. It shows almost everything you need to know about a manager’s investment-by-investment returns.

We typically look at this on a fund-by-fund basis - Fund II, Fund III, Fund IV - but you can also slice the data by geography, sector, or any other dimension you want to investigate.

The chart gives you an immediate visual sense of how much capital was invested in each company: the width of each column represents the size of the investment. The lighter section shows current NAV, while the darker section represents value that has already been distributed.

In general, the more balanced a manager’s returns are across investments, the better.

That is not a hard-and-fast rule. Some strategies are naturally more dependent on outliers. But a track record carried by one or two investments deserves much closer scrutiny.

The line-by-line above? I’d love that. But of course, this is also dummy data…

These are just three of the charts I use in manager diligence. They do not replace the underlying analysis, but they make it much easier to see where to focus it.

This article was a little different from my usual posts and went further into the details. I’d love to hear what you thought - just reply and let me know.

I’ve often been asked why I haven’t pursued venture funding for FundFrame.

There is more than one answer, but it ultimately comes down to a principle Vince Gilligan used when writing Breaking Bad: “Every action has consequences.”

This goes for me as a founder, it goes for my fellow partners and it goes for our customers.

Or, in textbook economic terms: there is no free lunch.

That became especially clear to me after reading about Airtable’s proposed acquisition by Bending Spoons. Airtable raised successive rounds at increasingly higher valuations, eventually reaching roughly $12bn. The company is now being acquired for a fraction of that amount.

The details are more nuanced than the headline suggests. This excellent round-up by Tyler Denk explains what the deal reveals about liquidation preferences, employee equity, and venture economics.

If you want a good business story that also explains how venture outcomes actually work, I highly recommend it.

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.