PE Firm Hg Marks Down Fund Value by 9% as Software Valuations Hit 20-Year Low

Hg's markdown signals intensifying pressure on private equity valuations amid growing concern that artificial intelligence could disrupt the software sector. The firm reduced the portfolio value of one of its funds by 9% in the first quarter, reflecting a broader pullback in software multiples to levels not seen in two decades.

The mark-to-market adjustment underscores how rising interest rates and shifting investor sentiment have compressed valuations across the technology sector. Software companies, once prized for their predictable subscription revenues and high margins, now face scrutiny over their ability to adapt to an AI-driven landscape. The valuation decline contrasts sharply with the boom years when growth prospects justified premium pricing.

The markdown raises risk that other private equity firms holding software-heavy portfolios could face similar pressure. Investors are increasingly weighing whether legacy software providers can maintain their competitive advantages against AI-native competitors offering more agile, cost-effective solutions. The sector's exposure to this technological shift remains a focal point for capital allocators reassessing long-term growth trajectories.