Private Credit Funds Face Scrutiny Over Software Exposure Amid Investor Concerns
From the desk of Jim Eccleston at Eccleston Law
Private credit fund managers are facing increased scrutiny over their exposure to software companies as investors continue to pull money from the sector during ongoing market volatility.
According to an analysis by The Wall Street Journal, several major private credit funds marketed by Apollo Global Management, Ares Management, Blackstone, and Blue Owl Capital appear to hold larger concentrations of software-related investments than their public filings suggest.
The report found that the four funds identified approximately 19 percent of their portfolios as tied to software investments. However, The Wall Street Journal concluded that the actual figure was closer to 25 percent after reviewing the underlying holdings.
Investor concern over software exposure has intensified amid uncertainty surrounding the impact of artificial intelligence on the sector. Those concerns contributed to record redemption requests from private credit funds during the first quarter of 2026.
Fund managers have defended their approach, arguing that software companies should not always fall into a single industry category. According to the report, many funds classify software businesses based on the industries they serve rather than labeling them strictly as technology investments.
Barclays analysts cited in the report warned that the lack of standardized reporting practices creates challenges for investors attempting to evaluate portfolio diversification and sector risk. "This sector 'massaging' generates concern from the investor community and makes it difficult to assess degrees of true diversification across funds," the analysts stated, according to The Wall Street Journal.
Additional concerns stem from leverage levels within the software sector itself. A recent Morgan Stanley analysis cited in the report found that software companies held in private credit portfolios generally carry higher debt burdens relative to earnings than businesses in other industries.
Alex Chaloff, chief investment officer at Bernstein Private Wealth Management, told The Wall Street Journal that many troubled private credit deals share a common connection to software-related investments.
The concerns arise as broader cracks emerge within portions of the private credit market. Recent reporting noted that Stone Ridge Asset Management informed investors it would satisfy only 11 percent of redemption requests in one of its private credit funds following a surge in withdrawal demands.
At the same time, Bank of America reportedly warned clients about risks tied to private credit exposure by identifying European financial firms that could face pressure from potential shocks within the sector.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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