Technology Moves Down the List of Favoured CV Sectors – Houlihan Lokey

Why It Matters

The reallocation signals a potential slowdown in tech secondary pricing and opens opportunities in traditionally defensive sectors, reshaping portfolio strategies for private‑equity firms.

Key Takeaways

• Tech sector ranking falls in secondary market preferences.
• Investors favor healthcare, consumer, industrials over technology.
• Valuation pressures drive shift away from tech assets.
• Secondary market activity remains robust despite sector rotation.
• Houlihan Lokey expects continued diversification of CV portfolios.

Pulse Analysis

The private‑equity secondary market has long been a barometer for sector sentiment, and recent commentary from Houlihan Lokey suggests a notable pivot away from technology. Michael Pilson highlighted that tech‑focused corporate venture (CV) deals are losing their luster as valuation multiples compress and deal flow faces heightened uncertainty. Disruptive forces such as rapid AI adoption, regulatory scrutiny, and macro‑economic headwinds have eroded confidence in sustaining the lofty premiums that once characterized tech assets. Consequently, investors are reassessing exposure and seeking more stable return profiles.

This sector rotation is already reshaping capital allocation across the secondary landscape. Healthcare, consumer staples, and industrials are emerging as the new favourites, buoyed by resilient demand and clearer earnings trajectories. Lower volatility in these areas translates into tighter spreads and more attractive risk‑adjusted returns for limited partners. At the same time, the retreat from tech does not imply a total exit; rather, it reflects a disciplined approach to pricing, with investors demanding deeper discounts to compensate for perceived upside risk. The net effect is a more diversified CV portfolio composition.

Looking ahead, Houlihan Lokey anticipates that the secondary market will maintain its momentum while the sector tilt continues to evolve. Firms that can source high‑quality assets in the favored non‑tech categories are likely to capture premium pricing and generate stronger cash‑flow returns. Meanwhile, technology assets may regain appeal if valuation gaps narrow or if breakthrough innovations restore growth narratives. For limited partners, the current environment underscores the importance of active monitoring and flexible allocation strategies to balance upside potential against emerging risks. The ongoing rebalancing offers both challenges and opportunities for savvy investors.