At a glance
- Because software multiples reset daily in public markets while buyout NAVs hold at quarter-end, the useful part for a pricing desk is that convergence is starting from the NAV side—software-heavy funds are the natural place for the next set of marks to move farthest.
- The pricing work then has to confront the asymmetry that sellers of fund interests and managers running continuation vehicles anchor to NAV statements written before the sell-off, and in GP-led processes the manager's own marks tend to set the starting price.
- The arithmetic of waiting runs against the seller, because discounts are quoted against the latest printed NAV; when the software repricing reaches the next statement, the base itself drops, and a seller who delays absorbs the move once in the NAV and again in whatever additional discount a buyer demands for carrying the repricing risk.
Software's public-market repricing is now inside private equity valuations: HarbourVest data reported by AltAssets shows the sell-off helped push global buyout returns negative in the first quarter while most other sectors suffered only modest declines.
Because software multiples reset daily in public markets while buyout NAVs hold at quarter-end, the useful part for a pricing desk is that convergence is starting from the NAV side—software-heavy funds are the natural place for the next set of marks to move farthest.
The pricing work then has to confront the asymmetry that sellers of fund interests and managers running continuation vehicles anchor to NAV statements written before the sell-off, and in GP-led processes the manager's own marks tend to set the starting price. A buyer who quotes a discount into that stale NAV is economically prepaying a markdown the manager has not booked.
The arithmetic of waiting runs against the seller, because discounts are quoted against the latest printed NAV; when the software repricing reaches the next statement, the base itself drops, and a seller who delays absorbs the move once in the NAV and again in whatever additional discount a buyer demands for carrying the repricing risk.
Bids should therefore be sized against the NAV that will exist next quarter, because if a fund's software names keep repricing down, a discount that looks fair against the last statement will be thin against the next. Asking for software exposure by vintage and by name before quoting is the cheapest diligence a pricing desk can run, since it turns a lurking gap into an explicit number ahead of the auditor's schedule.
Software exposure also gives buyers a scarce tool: a live public reference price for the underlying businesses. Most private portfolios lack that transparency, and a comparable-company chart visible to any LP shrinks the space a seller can defend, so the argument narrows to concentration and vintage—leaving the multiple itself out of the negotiation.
The boundary in the broader data should keep the trade selective. Global buyout returns went negative while other sectors fell modestly, which points to a repricing concentrated in software books rather than spread across portfolios; funds carrying heavy software weightings at pre-sale marks are where the bid-ask is widest, and they are the place a bidder can set price off current public multiples before the next NAV print moves the seller to that level unprompted.
Reported by the Pricing & Data desk from AltAssets. Published . Corrections