Key Takeaways
- • The Wall Street Journal found that four large private credit funds marketed by Apollo Global Management, Ares Management, Blackstone and Blue Owl Capital hold roughly 25% of investments in software, versus an average of about 19% disclosed in their filings.
- • Private credit managers argue AI will affect individual software firms differently and that software companies serving other sectors should be classified within those sectors, an approach used before current concerns about software arose.
- • Barclays analysts said the lack of a uniform industry classification method makes it difficult to assess true diversification across funds, warning of "massaging" of exposure figures.
- • Morgan Stanley found software companies in private-credit portfolios carry more debt relative to earnings on average than companies in any other industry.
- • Investor concern over software exposure helped drive record withdrawals from private credit funds in the first quarter of 2026, with Stone Ridge Asset Management meeting only 11% of redemption requests in one fund.
Summary
Private credit fund managers are reportedly downplaying their software exposure amid market upheaval, according to an analysis published Sunday, March 29, by The Wall Street Journal. The WSJ examined four large funds marketed to investors by Apollo Global Management, Ares Management, Blackstone and Blue Owl Capital and concluded that these funds hold more software exposure than their filings indicate. On average, the four funds listed about 19% of investments as software-related, while the WSJ calculated the figure at roughly 25%.
The discrepancy matters because investor worries about software exposure helped drive record withdrawals from private credit funds during the first quarter of 2026. Fund managers counter that artificial intelligence will affect each software firm differently, and that some companies will adjust or even benefit. They also argue that software companies serving other sectors should be reported within those sectors, since they depend on those industries. The WSJ noted this classification approach predates the current unease about software.
The WSJ cited a Barclays analysis noting there is no uniform way for private credit funds to classify industry exposure. Barclays analysts said the practice "generates concern from the investor community and makes it difficult to assess degrees of true diversification across funds." A Morgan Stanley analysis cited by the WSJ found software companies in private-credit portfolios have, on average, more debt relative to earnings than companies in any other industry.
Alex Chaloff, chief investment officer at Bernstein Private Wealth Management, told the WSJ: "If you look at the private-credit deals that have gone sideways, there's a software element to the majority of them."
Recent developments underline the strain in the sector. Stone Ridge Asset Management told investors it would meet only 11% of redemption requests in one of its private credit funds following a surge in withdrawal demands. Bank of America, meanwhile, has cautioned clients about private credit exposure by highlighting European financial stocks positioned against firms "most exposed to private credit shocks," citing potential downside risk.
The discrepancy matters because investor worries about software exposure helped drive record withdrawals from private credit funds during the first quarter of 2026. Fund managers counter that artificial intelligence will affect each software firm differently, and that some companies will adjust or even benefit. They also argue that software companies serving other sectors should be reported within those sectors, since they depend on those industries. The WSJ noted this classification approach predates the current unease about software.
The WSJ cited a Barclays analysis noting there is no uniform way for private credit funds to classify industry exposure. Barclays analysts said the practice "generates concern from the investor community and makes it difficult to assess degrees of true diversification across funds." A Morgan Stanley analysis cited by the WSJ found software companies in private-credit portfolios have, on average, more debt relative to earnings than companies in any other industry.
Alex Chaloff, chief investment officer at Bernstein Private Wealth Management, told the WSJ: "If you look at the private-credit deals that have gone sideways, there's a software element to the majority of them."
Recent developments underline the strain in the sector. Stone Ridge Asset Management told investors it would meet only 11% of redemption requests in one of its private credit funds following a surge in withdrawal demands. Bank of America, meanwhile, has cautioned clients about private credit exposure by highlighting European financial stocks positioned against firms "most exposed to private credit shocks," citing potential downside risk.
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