High-profile investor Hyperion Asset Management has significantly reduced its investment in software stocks, citing one of the most challenging periods in its 30-year history. The $15 billion money manager, based in Brisbane, experienced substantial setbacks due to a broad sell-off in the technology sector, fueled by concerns that artificial intelligence could disrupt traditional software services. Hyperion Asset Management manages investments across various sectors. They aim to deliver long-term growth by focusing on high-quality companies with sustainable competitive advantages.
The recent sell-off has impacted Hyperion’s returns, with all three strategies lagging behind market benchmarks over the past year. Specifically, the Small Growth Companies Fund underperformed its benchmark by 45.4 per cent, the Australian Growth Companies Fund by 34.5 per cent, and the Global Growth Fund by 19 per cent. Investment Director Jolon Knight explained that the firm had halved its exposure to traditional software companies in some funds, reducing its Australian growth fund’s software allocation from nearly 30 per cent in October to around 15 per cent, decreasing stakes in companies like WiseTech Global and Xero.
Changes in Hyperion’s global fund were even more pronounced, with software exposure decreasing from 17 per cent to just 6 per cent. The firm reduced its holdings in Intuit and ServiceNow, while fully exiting Workday and Hemnet. This shift comes as Hyperion closely monitors the potential impact of AI advancements, such as Anthropic’s AI tool Claude, on the software industry. Hyperion plans to focus on software companies providing mission-critical systems with strong competitive positions and proprietary data.
Knight reassured investors that Hyperion’s investment process remains consistent, noting that price-to-earnings ratios have decreased despite stable short-term earnings expectations. The firm has also begun rotating into more defensive sectors, including healthcare and industrial stocks, adding ASX-listed laboratory giant ALS to its Australian portfolios. Despite current market conditions, Hyperion remains focused on high-quality structural growth businesses with now more attractive entry points.
