Opportunities in tech for private equity investors

Rising inflation and resulting rate hikes have dragged technology companies lower eroding investor interest, but there are several opportunities in the sector for private equity investors, says Pictet Asset Management.

Technology has been one of the worst-performing sectors globally this year, with the BVP Nasdaq Emerging Cloud index slumping 51% as of September, whereas NASDAQ and S&P500 have declined 34% and 25%, respectively. However, private companies that are unicorns now have 5x annual revenues compared to companies that went public during the dot-com bubble.

The investment management firm talks about innovation in technology, with internet, cloud, and 5G bringing a revolution in the sector. Pictet expects corporate IT spending to remain robust going forward and cites a Gartner estimate that sees businesses spending an additional $100 bn on software in 2023. Other areas of growth include cybersecurity and e-commerce.

Pictet says there is plenty of private equity capital available to support tech firms, and venture capital firms in the US are ready with a kitty of $290 bn.

“We expect to see increased differentiation between stronger and weaker companies,” says Stanislas Chanavat, Investment Manager Thematics, at Pictet.

Pictet sees promise in the following sectors: enterprise software, fintech, cybersecurity, consumer internet, and industry 4.0. “Across our five conviction sectors, we believe that private markets offer a rich selection of investment opportunities, and the potential of very attractive risk-adjusted returns,” says Chanavat.

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