Private Credit Funds Understating Their Exposure to Software Struggles

Private credit fund managers are reportedly downplaying their exposure to software amid market upheaval.

That’s according to an analysis of the industry published Sunday (March 29) by The Wall Street Journal (WSJ).

The news outlet examined four large funds marketed to investors by Apollo Global Management, Ares Management, Blackstone and Blue Owl Capital, and found that these funds have more exposure to the software sector than their filings indicate.

The report notes that investor worries about the industry’s exposure to the software space helped drive record withdrawals from private credit funds during the first quarter of 2026. Fund managers argue that artificial intelligence (AI) will impact each software firm in different ways, and that companies will adjust or even benefit.

On average, the report said, the four funds listed around 19% of their investments as software-related, while the WSJ found that figure was actually around 25%. The WSJ cites a recent report from Barclays analysts on the private credit market which points out that there is no uniform way for private credit funds to classify their exposure to various industries.

“This sector ‘massaging’ generates concern from the investor community and makes it difficult to assess degrees of true diversification across funds,” the analysts said.

Private credit funds, the WSJ added, contend that software companies that serve other sectors should be reported as part of that sector as they depend on those industries. This approach began before the current unease about software.

The report also cites a recent analysis from Morgan Stanley which found that software companies in private-credit portfolios have, on average, more debt compared with their earnings than companies in any other industry.

“If you look at the private-credit deals that have gone sideways, there’s a software element to the majority of them,” Alex Chaloff, chief investment officer at Bernstein Private Wealth Management, told the WSJ.

In other private credit news, PYMNTS wrote last week about the industry’s shift into a phase where “funding access depends on how loans are financed after origination,” with market signals showing “capital flowing to structured credit even as liquidity stress emerges in fund-based lending.”

“In short,” the report added, “private credit is no longer a contest of who can originate loans. It is becoming a test of who can move them.”

Recent developments have underlined that divide. For example, Stone Ridge Asset Management told investors it would meet only 11% of redemption requests in one of its private credit funds after a surge withdrawal demands.

At the same time, Bank of America has cautioned clients about exposure to private credit by offering a selection of European financial stocks positioned against firms “most exposed to private credit shocks,” citing potential downside risk.