In an investor note following a research trip to the US, Adrian Martuccio, co-portfolio manager, said valuations for software and technology companies had been coming under pressure in recent months.
The financial frailty of companies had been demonstrated by stretched balance sheets, capital intensive businesses and economically-sensitive earnings.
The tech-heavy NASDAQ index in the US had lost 19.6% since the start of the year and 9% over the last six months.
Martuccio said: “We believe valuations in the private space will further reduce once companies in these sectors become desperate for the next round of capital inflow or when venture capitalists decide to exit.
“The US is already entering a new phase of a downturn, and it’s expected that there will be plenty of ‘down-rounds’ that will become painful from an investor’s perspective.”
Firms were struggling for funding and also to recruit staff in an environment of low unemployment, a situation that was not just limited to the technology sector.
“It was evident from our discussions that many larger tech companies that have recently struggled to attract talent due to many startups offering stock (which are now deeply underwater as stock prices plummet), and are finding more talent coming to the market wanting a new and stable job,” Martuccio said.
“This instability in the US jobs market, not just in software/cloud but consumer companies, is becoming more challenging as companies find that they need to be rational with their decisions to pivot and sustain their businesses.”
