Why private equity investors aren’t panicking about AI
5/21/202646 min
AI has rattled public SaaS stocks, but private markets may be taking a more measured view. Schroders’ Claire Smith joins us to unpack how private equity is assessing AI risk, why boring businesses can be beautiful, and how Australian investors can access small private companies globally.
In this episode:
00:00 - Is AI Killing Software?
03:04 - Introducing Claire Smith
05:02 - SaaS Sell-Off: Public vs Private Markets
07:41 - Building an AI Threat Matrix
13:38 - AI Opportunities Inside Private Equity
18:37 - Boring Businesses with Sticky Revenues
25:26 - How Schroders Assesses Private Equity Managers
34:06 - Adding Private Equity to a Portfolio
ETFs and stocks mentioned: Rio Tinto (ASX: RIO), Telstra (ASX: TLS), Commonwealth Bank (ASX: CBA), Foster’s, Atlassian (NASDAQ: TEAM), monday.com (NASDAQ: MNDY), Microsoft (NASDAQ: MSFT), OpenAI, Meta (NASDAQ: META), Nvidia (NASDAQ: NVDA), Spotify (NYSE: SPOT).
To deepen your understanding of investing in small and mid-cap semi-liquid private equity, visit Schroders Australia’s website and search ‘private equity’. There’s an education hub, further investment insights on private assets and information on the Schroder Specialist Private Equity Fund.
Newsletter recommendation: https://pefox.com/
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Clips
Transcript preview
First 90 secondsAlec Renehan· Host0:00
[gentle music] Everything you're about to hear is for education and entertainment purposes only. Whilst we are licensed, we're not aware of your personal financial circumstances. Any advice is general advice. Equity Mates operates under Australian Financial Services License 540697. AI's killing software, SAS stocks have fallen, you know, 70, 80% at times. How real is the threat?
Claire Smith· Guest0:20
The market's overreacted. Guilty until proven innocent has been the view on SAS. We took all the SAS companies within our portfolio, and then we created a threat assessment matrix looking at, will AI potentially make this software completely redundant in the future? If you've got a 10-person IT team, you might be like, "Yeah, we don't need this software. We can code it ourselves."
Bryce Leske· Host0:40
Equity Mates. [upbeat music] Welcome to Equity Mates, a show where we explore what's possible in the world of investing. My name's Bryce.
Alec Renehan· Host0:48
And I'm Ren. And today we are truly talking about what is possible. We're talking about how Australian investors, from the comfort of their couch, can access small private companies from around the world.
Bryce Leske· Host1:01
That's right. Today we are joined by Claire Smith. She's the head of investment directors public and private markets at Schroders, and we're gonna explore the Schroer Specialist Private Equity Fund.
Alec Renehan· Host1:11
Now, this is gonna be a fascinating conversation for me. I think over the past, call it six months now, we've seen the SAS apocalypse in public markets.
Bryce Leske· Host1:20
Mm.
Alec Renehan· Host1:20
We have seen high-flying software companies get absolutely decimated on the fear of Claude and the rest of AI, but mainly Claude- Mainly Claude ... uh, coming and