Alternative asset manager Blue Owl Capital is reducing its exposure to the software sector in its largest publicly traded private credit vehicle, as concerns grow over how artificial intelligence may reshape valuations and earnings in enterprise software, according to a report by Reuters.
The share of software-related assets in Blue Owl Capital Corp fell to 16% in the first quarter, down from 19% previously, according to management. Executives said the decline was largely driven by natural loan repayments but indicated a deliberate strategy to continue scaling back exposure where possible.
Chief executive Craig Packer said the firm would remain cautious on software lending, adding that future repayments would likely be used to further reduce sector concentration.
The shift reflects a broader reassessment across private equity and private credit markets, which had previously deployed significant capital into enterprise software companies during the post-pandemic period. More recently, investor sentiment has cooled amid concerns that AI-driven disruption could weigh on growth and compress valuations.
A smaller vehicle focused specifically on technology lending, Blue Owl Technology Finance Corp, will continue to target software investments but is applying stricter selection criteria. President Erik Bissonnette said the threshold for new deals has risen significantly, with the firm increasingly avoiding what it views as outdated business models in light of AI developments.
The company’s private credit platforms have also faced valuation pressure. Blue Owl Capital Corp marked down asset values by 2.7% in the first quarter and reduced its dividend, while the technology-focused fund recorded a 4.8% valuation decline.
Executives noted that volatility in loan markets and lower risk premiums have made earnings generation more challenging, even as underlying borrower performance remains stable. Despite the headwinds, both funds continued share buybacks during the quarter.
Blue Owl shares remain under pressure year-to-date, reflecting broader weakness across listed private credit and technology-linked lending strategies.
