Company Interview / Volatility not affecting all markets equally

Key topics:

Volatility contrast between public and private markets AI and shifting dynamics in software sector valuations Importance of value-driven and adaptable software businesses Private credit risks and differences between Australian and US markets

Jonathan Ng of Reach Alternative Investments sees ongoing volatility in public equity markets, attributing this to sentiment and former lofty valuations in certain sectors. Ng states that while public markets display pronounced swings, private markets have become more volatile over the past decade due to more frequent liquidity windows requiring regular valuations. However, Ng still views private markets as less volatile than public equities, presenting them as an attractive investment proposition, especially for long-term investors.

Ng highlights the minimal impact of the so-called “SaaS apocalypse” and AI disruption on private market software company valuations to date, as financials have yet to show meaningful changes. He outlines key debates: some believe enterprises building their in-house tools will erode software company revenues, while others argue AI could help software firms broaden offerings or face competition from new entrants. Ng concludes that companies providing true customer value will emerge as winners, while those relying on high switching costs risk being undermined by AI-driven reductions in these barriers.

Turning to private credit, Ng references the surge in redemption requests at Blackstone’s flagship credit fund, noting potential dangers in offering frequent liquidity for what are fundamentally long-term assets. He sees the Australian private credit market as distinct, dominated by property-related lending and attractive yields, underpinned by a different interest rate environment compared to the US.