Baillie Gifford, the manager of the Scottish Mortgage Investment Trust PLC (LSE:SMT), The Schiehallion Fund (LSE:MNTN) and the Baillie Gifford US Growth Trust PLC, has warned that private company valuations will experience more pain next year.
The £228bn fund management group’s head of private companies, Peter Singlehurst, predicted that the peak level of ‘down rounds’, where private companies are forced to accept a lower valuation in order to raise money, will occur in the middle of 2023.
He told a Financial Times conference in London that this was based on history showing that the peak frequency of down rounds was normally around 18 months after the stock market peak.
Baillie Gifford’s portfolios have already felt this pain as its investment trust marks to market all of its private holdings due to the daily priced nature of listed investment companies.
Singlehurst, who manages The Schiehallion Fund (LSE:MNTN), also said he and his colleagues are “not ready to walk away from China at all”.
If Chinese companies can continue raising money from overseas investors, then Baillie Gifford will continue to look for businesses like his fund’s holdings of TikTok owner ByteDance and drinks companies Jiangxiaobai and Genki Forest, that can deliver “structural growth stories”, according to a report in the FT.