How Australian super fund avoided the SaaSpocalypse
Marina Pasika, head of private markets at the $75bn Rest super fund, explains why her fund deliberately avoided traditional software managers when building out its private equity programme
Australia's $75bn Rest sidestepped the worst of the so-called SaaSpocalypse after deliberately avoiding traditional software managers when commencing the build out of its private equity programme five years ago, Marina Pasika, the fund’s head of private markets, tells AOX.
As a reminder, the SaaSpocalypse was a market correction earlier this year in which service-as-a-software (or SaaS) businesses saw billions of dollars wiped from their market value over fears AI would make them obsolete.
Pasika says Rest’s light software exposure reflected a combination of factors, including pricing discipline, manager selection and instincts developed during almost a decade at the Future Fund, where she says the SWF had a similar underweight to traditional software companies.
“It was late 2020, early 2021 by the time [Rest] had a PE strategy approved and got going. The pricing of software deals was very high, and they were being underwritten to perfection, so everything had to go right. It just wasn't something that I was expressly seeking, and I think I'd always been cautious about the space,” she says.
Although Rest does have some software exposure through its generalist managers, it currently has no software-focused managers on its books. This positioning has been playing in the fund’s favour for now, as it has been able to dodge the SaaSpocalypse bullet.
“There were lots of managers generating great returns quite clearly, but we couldn't see any real barriers to entry…They were all following similar ‘buy-and-build’ strategies as each other. It just didn't feel differentiated,” Pasika says.
Instead, the venture book is where Rest's technology exposure deliberately sits, so that the fund’s members can get access to innovation through early-stage investment, rather than the leveraged buyouts of mature SaaS businesses underwritten at 2021 multiples.
“Most of our software exposure is in the venture and growth portfolio…That’s deliberate because it is positioned to take advantage of that [disruption]...We are big believers that AI will bifurcate the industry, and you need to pick your winners, so it is still something we are looking to have in the portfolio,” she says.
Pasika was appointed Rest’s head of private markets in May after stepping into the role on an interim basis and leading the fund’s alternatives desk. Before this, she spent almost a decade at the Future Fund, where a key lesson was a total portfolio style-approach that compares each opportunity on a risk-return basis, regardless of asset class.
“I think ultimately investing is about taking a variety of well-compensated risks that are not correlated. It's not about whether [an opportunity] fits in an asset class bucket that we have, or if it meets some precisely prescribed return number for that particular asset class. Those types of things don't really matter,” she says.