Private Credit Loved Software. AI Didn't Get the Memo.

It's Friday.

We're three coffees deep, and the private credit market is getting a stress test.

Let's talk about $500 billion in loans, a 5% exit door, and why AI is making grown fund managers sweat.

Coffee at the ready.…

Private credit's AI problem just got its first real stress test.

Blue Owl's tech-focused fund received 40.7% redemption requests last quarter — the highest the industry has ever seen. The $1.8 trillion private credit market has roughly a quarter of its portfolio in software companies, AI is now threatening.

Watch Ares, Apollo, and Blackstone next — their funds are already capping withdrawals too.

In a bank run, you can at least queue outside. In private credit, the door opens 5% per quarter — and the queue just quadrupled.

Private credit lenders spent a decade loading up on software loans. SaaS companies had sticky revenue, fat margins, and low churn — the perfect borrower profile. Loans to the sector ballooned from $8 billion in 2015 to $500 billion by the end of 2025, according to the Bank for International Settlements.

Then AI changed the maths. New tools started automating the very tasks these companies charged for as subscriptions. Software stocks cratered 30% between October 2025 and February 2026. The loans didn't reprice. They can't — they're private and hard to sell. So investors did the only thing they could: they asked for their money back.

Blue Owl's flagship $36 billion fund (OCIC) got 21.9% withdrawal requests. Its smaller $6 billion tech fund (OTIC) got 40.7%. Both capped at 5%. In total, $5.4 billion was asked to leave. Roughly $1.2 billion actually could. Nice to want things.

But zoom out. OTIC's actual net outflow was $52 million. OCIC's was $116 million — a fraction of a per cent of total assets. The Globe and Mail found 1% of OCIC shareholders filed the majority of requests. A handful of institutions repositioning, not a stampede.

It's not just Blue Owl. Ares and Apollo both capped redemptions at 5% after requests hit 11.6% and 11.2%, respectively. UBS warns a worst-case AI scenario could push private credit defaults to 13% — more than five times the historical average. Morgan Stanley forecasts 8%, still well above the 2–2.5% norm.

The counter-signal: Blue Owl sold $600 million in loans at 99.7 cents on the dollar. Carlyle and BlackRock are buying discounted software debt. Blackstone honoured 100% of its redemption requests and injected $400 million in capital. Smart money is walking in while scared money queues for the exit.

Pro: These loans mature in 3–5 years, PE sponsors hold $1.7 trillion in dry powder, and informed buyers are already picking up discounted debt — AI may not kill borrowers before the loans pay out.

Con: The loans were underwritten on pre-AI assumptions about SaaS margins, and recovery values on asset-light software companies could be ugly if those crack.

Our read: This is a repricing, not a crisis — but the question of whether you can lend $500 billion against a business model AI is rewriting isn't going away.

[Report] Bank for International Settlements — "Private credit's software lending meets AI disruption"

SaaS loans grew 60x in a decade. Funds with high software exposure have underperformed peers by 5 percentage points since October 2025.

Why it matters: When the central bank of central banks flags a structural risk, the "it's just sentiment" defence gets harder to sell.

SaaS lending: $8B in 2015. $500B by 2025. — BIS [Report]

Morningstar — "Why AI Worries About Software Are Hitting Private Credit" — The clearest explainer on why lenders loved SaaS and why AI broke the thesis. [Analysis]

CNBC — "Private credit's 'zero-loss fantasy' is coming to an end" — Morgan Stanley's 8% default forecast and the "amend-and-pretend" tools keeping zombie borrowers alive. [Analysis]

Congressional Research Service — "Private Credit Funds Redemption Restrictions" — Congress is watching. The CRS briefing maps contagion channels to the broader financial system. [Report]

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