A: On the quiet and without the hype

HgT is a compelling investment for those seeking steady, long-term returns in the tech space – especially if you are not a fan of the speculative hype often surrounding mega-cap tech companies. The trust offers a distinct opportunity to tap into the high-growth potential of private European mid-market companies in the software and services sectors. These are firms that remain under the public markets’ radar but are reaping significant benefits from the ongoing digitalisation wave.

The core of HgT’s approach is to invest in a portfolio of lower-risk, consistently profitable companies that deliver mission-critical software solutions. With a portfolio of around 50 such holdings, valued at approximately £2.5bn, HgT focuses on businesses serving essential functions for small and medium-sized enterprises (SMEs). The businesses span ERP and payroll, tax and accounting, legal and compliance and insurance. A key characteristic is their strong recurring revenues, often over 90%, which are bolstered by software-as-a-service (SaaS) subscription models. This foundation ensures steadily growing cash flow that, coupled with high customer retention and strong opportunities for upselling and cross-selling, allows HgT to generate reliable returns even in challenging economic environments.

With a proven track record of delivering impressive NAV returns – averaging around 18% annually over the past decade – HgT represents a long-term investment that lets shareholders ‘sleep well’. The trust’s performance has been underpinned by strong EBITDA momentum of 20–30% per year, driven by both organic growth and value-accretive M&A. By combining defensive growth with the digitalisation megatrend, HgT has shown resilience even in volatile markets, delivering significant uplifts to previous valuations when realising investments and outperforming many public indices.

While the AI investment narrative has largely focused on major US tech firms like NVIDIA and the rest of the ‘Magnificent 7’, HgT offers a compelling alternative or complement. The trust’s focus on smaller, unlisted companies allows it to access a broader and more diverse array of opportunities. Many of its portfolio companies are already integrating AI-driven solutions. HgT’s investment manager (Hg) sees significant potential for AI/machine learning for customer-facing applications, such as improving the revenue profile (for instance churn prediction and prevention tools, upsell/cross-sell modelling) and developing new products, as well as internal productivity opportunities, most notably in coding, customer support and marketing. These smaller-scale yet crucial innovations are happening outside the crowded landscape dominated by big-tech names.

HgT’s investment manager is also actively supporting its portfolio companies on the AI journey. It has been an early adopter, exploring the potential of AI, and has built a team of 20 in-house data and AI experts and more than 50 consultant specialists, whose experience has been codified in Retina, a suite of AI-powered SaaS tools available to Hg’s portfolio companies. Retina augments their business intelligence, data-driven decision-making and M&A sourcing.

If you would like to talk to Andrew Whipp (managing director, investor engagement) or Milosz Papst (director of investment trusts content) about HgT, drop them a line to arrange a call.

You can read our latest analysis on the stock here and review all historical publications here.