Flash update from Kepler Trust Intelligence

NB Private Equity Partners Limited

04 March 2026

 

NB Private Equity Partners (NBPE)

04/03/2026

Flash update from Kepler Trust Intelligence

Over the past few weeks, stocks exposed to the software sector have experienced a significant de-rating, reflecting market worries that software business models are fundamentally threatened by AI. As well as listed software names, this has also impacted the listed private equity (LPE) sector.

Certainly, the private equity sector in general has been relatively enthusiastic investors in software businesses. As a result, across non-specialist LPE trusts, there is exposure to the sector, but it is in some cases hard to be specific given different levels of disclosure. Exposure to the broad "IT" sector within LPE trusts is between 34% and 14%. Clearly, behind these bald statistics, the precise exposure to "software" is in some cases hard to determine, and even more so exposure to software companies which are potentially threatened by AI.

NB Private Equity Partners (NBPE) makes investments exclusively through co-investments, meaning that each and every company in the portfolio has been chosen for its own attributes, but also within the context of portfolio management requirements. By design, the portfolio is well diversified, but NBPE is resolutely focussed on two key themes: long-term secular growth and companies with lower expected cyclicality. Underlying revenue and earnings growth from the portfolio has been resilient and strong, which is one of the reasons that the board have indicated a step-change in the pace of both making new investments and a renewed commitment to buybacks. Both of these measures over the coming calendar year expect to result in gearing rising toward the board's targeted level of 105-110%, and illustrate the board's growing confidence.

Within Software, NBPE have released their latest presentation which gives more insight into the sub-sectors that each of its investee companies are exposed to. Within the 20% exposure to Tech, Media & Telecom (TMT), we find that around half (11%) is exposed to software, whilst other exposures are to communications / media and other technology & services including IT, government, payments and internet.

With only 11% of the portfolio exposed to software, we think the market reaction of a share price decline of c. 13% YTD is overdone. A quick look at the underlying companies that NBPE is invested in within this Software category illustrates that they are exposed to widely different areas and it seems unlikely that these companies will not be able to adapt or use AI to further their competitive advantages. Many of these companies have competitive strengths which would make significant disruption in the near term difficult. Certainly in terms of valuations, with public market comparables having been de-rated, there may be some near term valuation pressure. However, over the medium term the outlook will be more nuanced. We take the view that private equity backed businesses are nimble and adept at facing challenges head-on, with well-resourced management teams who are highly incentivised to grow their businesses within niches over the long term. Investors who share our view might view the recent pull-back in share price terms as an opportunity.

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