Enterprise Software Monthly Report | July

06 July 2022

Enterprise Software ETF Monthly Report: Key Takeaways


  • June proved to be another challenging month as recessionary fears mounted on the back of higher inflation and slowing growth. The month also capped off the worst first half start to the year since 1970.[1] Here’s a couple things that weren’t invented at that time: The internet, email, mobile phones, barcodes, post-it-notes, the Rubik’s cube, MRI machines, Walkmans, and floppy disks.
  • Back in 1970, we had M2 contracting sharply, Core PCE was 4.7%, Vietnam war spending surged, and recession ruled the market. Now, we have M2 contracting, Core PCE also 4.7%, spending spiralling, and extremely tight monetary conditions. It looks like the fed has pivoted from a soft landing towards one that will do anything to put a lid on inflation. [2]
  • With great inflation comes great rate hikes. The most important question right now is just how and when inflation will peak. While interest rate hikes help abate demand, the supply side of the equation remains mainly unsolved, as 2/3rds of the recent CPI inflationary reading was fuelled by the supply side.
  • Supply chains yet to come back online, the Russia/Ukraine war, and rising Energy prices have thrown more fuel on the fire…literally. This has caused the “price of everything” to skyrocket, yet the consumer has remained strong in step with the booming labour market until very recent readings.[3] Cracks are starting to show as economists start to put percentage figures on the likelihood of a recession (if we are not already in one).
  • • While commodities spiked into the first half of the year, they are now starting to turn the corner (especially on the industrial metals side) as we are lapping comps and demand concerns start to mount. It looks like an easing in commodity prices is now absolutely necessary before we see peak inflation. Once we better understand what this looks like, it will be time to sharpen the pencil on beat-down companies that have seen severe multiple compression. With cash flows pushed to future dates, we believe renewables have been adversely affected and this will ease up in H2. [4]

Please note that all performance figures are showing net data. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product.


Macro Outlook

The main story of the quarter continued to be multiple compression. If we look at the high-growth cohort (revenue growth YoY above 30%) in software, the median multiple peaked at 41x EV/Revenue in February of 2021, and remained elevated, to 35x in November 2021. That multiple is now 8x. This is a multiple compression of 27 turns in the span of seven months. [5]

Multiple compression was driven by an overall de-risking of the investor base as everyone fled to value plays as well as companies that brought cash flow forward in a rising rate environment. When you have WTI north of $120, Oil & Gas companies actually start to screen from a factor basis as growth and momentum rather than the deep value territory that they have been locked in.[6] CPG goods and even some retailers are now also more expensive than megacap tech stocks. But you have to think of the fundamentals.

Covid accelerated so many underlying components of digital transformation.[7] Sure, some sub-industries like e-commerce will likely experience “lapping comps”, as mentioned above, but we believe cloud infrastructure and security companies will experience more enduring growth. Now could be the time to buy software companies.


Enterprise Software ETF Performance (as of 30.06.2022)








Purpose Enterprise Software ESG-S UCITS ETF (Acc)







Solactive Purpose Enterprise Software ESG Screened Index NTR







Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Source: Bloomberg / HANetf. Data as of 30/06/2022. Please note that all performance figures show net data. 

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