European private equity investor Hg cut the portfolio valuation of one of its flagship investment vehicles by 9% in Q1, reflecting a sharp decline in software sector valuations amid growing concerns over the impact of AI on earnings growth, according to a report by Bloomberg.
The markdown affected HgCapital Trust, which provides public market investors with exposure to privately held European technology businesses, including software groups IFS and Visma.
Hg said the valuation decline was partly offset by a positive 5% contribution from trading performance across the portfolio.
Software equities have come under sustained pressure in recent months as investors reassess long-term growth prospects for the sector in light of rapid advances in AI technology. Market concerns have centred on the possibility that automation and generative AI tools could disrupt traditional software revenue models and compress future earnings growth.
In a statement accompanying the update, HgCapital Trust chairman Jim Strang said the selloff across software assets had been broadly indiscriminate, with limited differentiation between business models and sub-sectors.
The trust currently trades at an estimated 30% discount to its net asset value. According to analyst estimates from Peel Hunt, the vehicle has spent roughly £19 million on share buybacks since February in an effort to narrow the discount.
Shares in HgCapital Trust edged lower in London trading following the update.
Hg oversees approximately $110bn in assets and employs more than 400 staff globally.
