Bailador is sitting atop $144 million in cash, more than triple the $44 million it held this time last year, after realising $153 million.
Last month, it deployed $5 million of this cash into AI-enabled prescriptions start-up InstantScripts in a deal that raised the company’s valuation by 10 per cent. Mr Wilson said it was likely that new and follow-on investments would flow this year.
“We have felt for some time that valuations generally were becoming aggressive, so our focus has been more on realising investments, and we have been particularly selective when making new investments,” the LIC said in its latest portfolio update.
Net cash represented 46 per cent of Bailador’s portfolio at July 31. The remainder is almost evenly split between public and private investments – 29 per cent and 24 per cent respectively – representing a significant shift to listed investments since this time last year thanks to the IPO of its largest holding, hotel bookings business SiteMinder.
The fund holds up to 12 companies, with eight currently named including men’s digital healthcare market Mosh, digital furniture store Brosa, and tours and activities booking technology company Rezdy.
Bailador delivered strong performance over the financial year with net profit rising 23 per cent to $34 million. However, growth was tempered by declines in the value of its listed investments amid challenging market conditions.
The fund, which invests across public and private tech markets, wrote down the value of e-commerce platform Nosto and Access Telehealth by 20 per cent and 24 per cent respectively, while leaving the valuations of InstantScripts, Mosh and Rezdy untouched.
Brosa was revalued up 49 per cent following solid trading performance.
ASX-listed holdings SiteMinder and Straker Translations have both fallen steeply in value, the former 40 per cent since IPO in November 2021, and the latter 32 per cent over the past year.
Tech company valuations typically fall as rates rise, reflecting the lower present value of future earnings.
The tech sector has jumped 22 per cent since mid-June, but remains down 32 per cent over the past year, underscoring the challenge facing tech companies as financial conditions tighten.
Declines in listed valuations have bled into private markets, as superannuation-backed and listed venture capital funds re-evaluate their start-up portfolios and set more realistic valuations. This challenging funding environment has led private companies to lay off staff and cut costs as businesses seek profitability.
However, a $1.1 billion takeover bid for mapping technology firm Nearmap by US private equity group Thoma Bravo on Monday suggests tech bargain hunting is on in earnest.
Bailador’s returns to shareholders outperformed the S&P/ASX 200 and the S&P/ASX All Technology Index in 2021-22, returning 9.8 per cent versus the tech-index decline of 36 per cent.
This is significantly lower than financial year 2021 when the company reaped the benefits of soaring tech valuations to an annual shareholder return of 89 per cent.
Mr Wilson said Bailador has a conservative approach to valuation and remains confident in the underlying fundamentals of all its holdings.