HgCapital (HGT) manager Hg has sold a substantial chunk of equity legal software holding Septeo, but the trust will retain its stake.

The private equity asset manager agreed to sell €500m (£493m) of equity in the French group to a group of institutional investors, but HGT wants to retain its holding, which was valued at £126m in September.

HGT invests through its parent’s large range of funds and as part of the deal will convert €45m of its existing net asset value (NAV) exposure to Septeo through the Hg Genesis 9 fund into a ‘fee-free co-investment’ by investing alongside the new investors coming into the business.

The increase in fee-free investors is good news for shareholders, and this type of investment now makes up 12% of the portfolio, up from 10%.

Hg first invested in Septeo in 2020 and in December 2024 said it was valued at over €3bn thanks to its uptake by law firms, corporate legal departments, accounts, and real estate businesses across France, the US and Canada.

The investment company has also increased its investment the $6.4bn take-private transaction of OneStream, which makes financial software. The fund confirmed it had increased its investment to £100m from £93m after an ‘over-subscribed syndication’ of equity in OneStream.

It announced its plan to invest £93m in the Nasdaq-listed finance management platform through Hg’s Saturn fund in January. The all-cash transaction will see Hg’s Saturn fund acquiring 100% of OneStream’s shares, including those owned by investment funds managed by KKR, which took OneStream public.

Hg will be the majority shareholders, with global investor General Atlantic, and specialist technology investor Tidemark taking minority stakes.

‘Together these two transactions, both of which were agreed during a period of heightened volatility in public markets, reflect continued demand in the private markets for Hg’s portfolio investments,’ the fund said in a stock market announcement.

HGT has come under significant pressure in recent weeks after the launch of legal tools by Anthropic’s sparked a sell-off in software stocks that were expected to be disrupted by the latest development in artificial intelligence (AI) markets.

The crash in the company’s shares, which saw a quarter of its value wiped in just a matter of days before staging a sharp recovery, attracted investors such as Valhalla Ventures, the investment vehicle of Mark and Linda O’Hara who founded alternative data giant Preqin and later sold it to BlackRock for £2.6bn.

Valhalla disclosed a 3.3% stake in HGT on 6 February, and increasing it to 4.4% a few days later as it bet on the fund’s recovery.

JPMorgan Cazenove Christopher Brown said deploying a further £46m is HGT operating in ‘business-as-usual mode’ despite the share sell-off.

‘However, with the backdrop of listed software companies heavily de-rating over the past few weeks amid AI disruption concerns and HGT itself having a geared exposure to the software sector, we think some investors may have preferred to see capital used to reduce gearing or perhaps to buy back shares,’ he said.

The switch to co-investments may have been motivated by a desire to remove exposure to the fund-level loans, essentially owning a holding in a structure ‘that has less gearing for the same underlying investment’.

‘A greater proportion of NAV invested in co-investments also reduces look through fees, which is welcome,’ said Brown.

‘We continue to prefer listed private equity names with a greater degree of sector diversification within their portfolios and we are ‘underweight’ HGT.’