LPs may judge manager continuation by TVPI, DPI and asset-level valuations

An LP may stop backing a venture manager because of fundraising pace, limited available capital or insufficient distributions. Fund-of-funds investors must also account for their own fundraising, while endowments face the denominator effect.

The evaluation can compare a manager’s TVPI and returned capital with anonymized results from roughly 300 groups across vintages. Because TVPI depends on valuation practices, the analysis may go down to the underlying assets and compare how different managers value the same company.

Absent a catastrophic team or organizational problem, or a loss of trust, investors often give a manager two or three funds to demonstrate results. Ultimately, performance is treated as the main guide for a fiduciary managing other people’s money.