The Counterintuitive World of Fund Management Software

Not surprisingly, most people who use or are evaluating fund management software don’t spend their days thinking about proper database structure. They already have a full-time job, after all, and it’s not the most interesting or engaging topic.

But proper database structure is extremely important to firms—or, at least, it should be. Your data has to be structured the right way if you want to get actionable insights out of your fund management software. And you have to be able to access that data quickly and efficiently if you want to make fast, well-informed decisions that keep you ahead of your competitors.

Plus, implementing fund management software requires an investment of time, effort, and capital. So, surely you want to see that investment deliver a solid return.  

(Incidentally, if you really want to do a deep dive on database structure, a good place to start is the Five Normal Forms in Relational Database Theory. Heads up: It gets complicated quickly!)

Common Mistakes 

To use fund management software effectively, you’ve got to store data in it the right way. Unfortunately, it’s been our experience that the right way often feels counterintuitive to fund managers, whether they’re looking to implement a new fund management software system or are in the process of building their own.

An example of this counterintuitive nature is when users want to store everything they know about a given company on that company’s account record. That’s where you might go to determine what stage you’re in with that company or how much you’ve invested in them in the past. So, it makes sense to cram as much historical information about that client as possible into one record, right? Actually, it does not.

Seeing the Big Picture With Fund Management Software 

The reason that loading up a company’s record with all the data about them that you can get your hands on is that you’re likely to evaluate that same organization more than once over its lifetime. And if you’re tracking due diligence on them in your database, one of two things is probably going to happen.

You may end up overwriting past information when you evaluate them again, at which point that data is lost, and with it, the value it still had for your firm. Or you might try to keep everything and create an enormous account record with lots of historical data, but information that’s highly disorganized, very difficult to report on, and from which it’s nearly impossible to gain any valuable insights.

Fund Management Software and Post-Investment Data

Many firms make the same structural mistake as above when tracking post-investment data. We often see situations in which a prospective customer has created many (read: too many) fields at the account level, like “Investment 1,” “Investment 2,” “Investment 3,” etc.

This feels like it might be a good approach. If you’ve never made more than one investment with the same company, the account level seems like a logical place to store investment data. But what happens as your firm grows and you get to investment 10, 11, 12…? You’ve got to add a new field with each investment, which not only wastes a great deal of screen real estate but also makes it very difficult to aggregate that data.

Before you know it, you’re six months or a year or two years into using your database and while it contains a large amount of data, that information is so hard to find that you’re almost wishing you had less of it!

Use the Right Fund Management Software From the Start

At Altvia, we often get called in to help untangle a custom-built system or a competitor’s system and implement our advanced solution with the correct database structure.

We’re happy to assist firms that find themselves in this situation, of course. But a better approach—and one that doesn’t involve downtime and backtracking—is to use Altvia fund management software that’s optimized for effective data storage and access right from the start!

Data & Tech Guide
fundraising software

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