Private Credit Investors See AI as Market Disruptor, Not SaaS Apocalypse
Major private credit firms including Ares and Man Group told CNBC that AI will create winners and losers in software rather than causing a broad industry collapse. The sector, which has invested heavily in software over the past five years, is now tightening lending standards and focusing on mission-critical software and companies where AI enhances rather than disrupts operations. The reassessment matters because private credit has become a major funding source for software companies, with exposure between 20-30% on average.
Private credit investors are recalibrating their software sector bets in response to AI disruption, but they are rejecting the "SaaSpocalypse" narrative that emerged during a sharp tech sell-off in February. Ares co-president Blair Jacobsen noted that the firm has invested in software for over 15 years and sees opportunity in companies providing mission-critical services in regulated industries, where switching costs are high. Man Group's chief investment officer Kevin Marchetti said the firm is increasingly focusing on "old economy" businesses where AI enhances operations rather than upending business models, including healthcare services and distribution companies. Private credit has grown to represent 20-30% of average exposure to the software sector over the past five years, making this reassessment significant for capital allocation. Lenders are responding by widening spreads, tightening documentation, and lowering loan-to-value ratios, creating what Jacobsen described as "a very, very attractive dynamic" for credit investors. HarbourVest Partners CEO John Toomey suggested that recent sentiment has "overwashed fundamentals" and that while some companies will face significant headwinds, others will adapt and deploy valuable services to customers.
What different sources said
- CNBCCenter
Private credit lenders say their big software bet faces an AI reckoning — but not a ‘SaaSpocalypse'
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