News
AI Risk · Fund Disclosure · Private Credit · Software Exposure
A detailed analysis by The Wall Street Journal revealed that four major private-credit funds—Apollo Global Management, Ares Management, Blackstone, and Blue Owl Capital—significantly underreported their software industry exposure, averaging 25% instead of the stated 19%, prompting record investor withdrawals in the first quarter.
Fund managers' varied classification methodologies, which often categorize software companies serving other sectors under those industries, contribute to this discrepancy, making true diversification assessment difficult for investors. For instance, Blue Owl Credit Income Corp.
reported 11.6% software exposure but actually held around 21%, while Blackstone Private Credit Fund reported 25.7% against an actual 33%. Ares Capital Corp.
reported 23.8% versus nearly 30%, and Apollo Debt Solutions reported 13.6% against roughly 16%. Specific examples include Blackstone categorizing over $1 billion in loans to Inovalon as "IT Services" despite Inovalon identifying as a software company, and Ares classifying Symplr Software under "health care equipment and services" due to GICS standards.
Morgan Stanley analysis indicates software companies in private-credit portfolios carry higher debt relative to earnings than any other sector, and Bernstein Private Wealth Management notes a software element in most private-credit deals that have "gone sideways." Blue Owl, which previously touted its tech investing, later claimed to have the lowest software exposure among peers.
