FT : Retail investors pull billions from private capital’s credit gold mine

Retail investors pull billions from private capital’s credit gold mine
Flood of redemptions threatens to stall one of Wall Street’s most important sources of growth

Wealthy individuals have sought to pull more than $10bn from some of the largest private credit funds in the first quarter, prompting investment managers to limit withdrawals and threatening to stall one of Wall Street’s most important sources of growth.

Debt funds managed by powerhouse firms including Blackstone, BlackRock, Cliffwater, Morgan Stanley and Monroe Capital have agreed to honour about 70 per cent of the $10.1bn of redemption requests they have faced, according to FT calculations.

That number is expected to rise over the next two weeks, as funds managed by Ares Management, Apollo Global, Blue Owl, Oaktree and Goldman Sachs tally up how many of their investors are heading for the exits.

Some on Wall Street, such as former Pimco co-chief executive Mohamed El-Erian, have said the ructions are reminiscent of the early days of the 2008 financial crisis. But many private capital executives told the FT they were perplexed by what they felt was an indiscriminate sell-off that did not reflect the performance of their portfolios.

The funds that have already reported withdrawals manage investment portfolios worth about $166bn, a fraction of the roughly $1.5tn invested across direct lending funds. But these vehicles have been among the fastest-growing corners of the private investment industry, providing a building block for money managers as they set their sights on cracking the $9tn US retirement market.

The redemptions have reversed a five-year stretch in which nearly $200bn flowed into the debt funds of large private market groups, helping to spur a boom in their growth and profitability. This reversal has led investors to question whether private capital groups deserve their once rich valuations relative to the broader market.

It has caused ferocious selling pressure on the stocks of firms such as Blackstone, KKR, Blue Owl, Ares and Apollo, whose shares have plunged by 25 per cent or more this year, shedding more than $100bn in combined market value.


“The air has come out of the balloon and the whole industry has been under a lot of pressure,” says CT Fitzpatrick, chief executive of Vulcan Value Partners, a longtime shareholder in publicly traded private capital groups.

Firms such as Blackstone and Blue Owl do not hold loans on their own books that would expose them to large losses, and they carry minimal corporate debt. But their share prices have been volatile in recent years as investor perceptions of their future growth have swung wildly amid geopolitical and market upheaval. Now they face questions about the performance of retail funds that have underpinned their success while masking a broader pullback in investment from many pensions and endowments.

Blackstone’s $48bn Bcred debt fund has become its single largest source of fees, representing about 13 per cent of the $1.3tn firm’s overall fee revenue. The fund pays Blackstone a 1.25 per cent annual management fee on investors’ assets and a 12.5 per cent performance fee over a 5 per cent minimum return. Such funds charge performance fees based on their marks and dividends, not when assets are actually sold. Bcred generated $1.2bn in fees for Blackstone last year.


Blue Owl’s $35bn private fund, known as OCIC, has been similarly vital to its growth. The fund last year paid out $447mn in management and incentive fees to Blue Owl. It is just one of a handful of semi-liquid private credit funds that the group manages. Analysts at Goldman Sachs estimate that Blue Owl is more exposed to these funds targeted at wealthy individuals than any of its publicly traded rivals, pegging 21 per cent of the firm’s annual fee-related revenues to the vehicles.

Such fees have taken on an increased prominence in recent years as private capital groups arranged their finances to better appeal to stock market investors by emphasising their more predictable fee-based earnings, instead of larger episodic payouts from winning deals. It incentivised firms to quickly grow their assets, particularly in high-margin retail funds, though it came with the risk that those very investors could redeem their money during market upheavals.

“We know how the masses behave,” said Jack Shannon, analyst at Morningstar. “It’s fickle, they will chase performance. They will leave the moment they sense danger.”

Yet the money propelled private capital groups to new heights as their valuations soared to 30 or 40 times their fee-based earnings, giving them a significant premium to other financial services companies such as banks and insurers, as well as the broader market. Assets poured into retail private credit funds and similar products targeting corporate buyouts, property deals and infrastructure investments. For many firms, particularly Blue Owl and Blackstone, such assets drove their growth.

Goldman Sachs analysts calculate that retail credit funds saw their assets increase from $34bn at the end of 2021 to $222bn at the end of last year. But that growth has gone in reverse this year. After a wave of redemptions underscored the risk that investors cannot always get their money back, Goldman now predicts such funds could shed $45bn to $70bn in assets over the next two years. Blackstone continues to attract new money from its private equity and property retail funds, softening the hit from Bcred’s redemptions.

Fitzpatrick, the investor at Vulcan Value, said his firm had sold some of its private capital holdings early last year after their valuations soared. But he believes companies such as Ares that derive a greater share of their fees from less flighty pensions and endowments had been indiscriminately sold off by investors.

“The whole industry has been hit with a pretty broad brush,” he said of the sell-off. “People are not differentiating between companies that have better business models and those with weaker business models.”

FT Lex : Was Revolut’s banking licence worth the wait?

Was Revolut’s banking licence worth the wait?
Group would be wise to move gradually with its lending ambitions

Revolut, the $75bn British fintech, finally has a full UK banking licence more than four years after it first applied. Rival bankers, investors and even chancellor Rachel Reeves have been closely following the saga. The group’s 13mn UK customers may wonder what all the fuss was about.

When it emailed users last week to share the good news, Revolut said it was planning “more banking features soon”, but had little detail on what that means. For now, it stressed, “nothing will change”. That’s as true of Revolut itself as it is of the customer experience.

The most obvious gap in Revolut’s banking offering in the UK is its lack of lending, but a licence was not the limiting factor there — there are plenty of large non-bank lenders around, from mortgage providers such as Together to credit card companies including NewDay.

A banking licence makes it easier to compete with them. Banks can fund loans with cheap customer deposits. But funding costs are not the biggest barrier to building a big loan book; the real challenge is having enough risk management expertise to grow safely. Many payments-focused fintechs have struggled to make the leap to lending.

A series of open job advertisements suggest Revolut has lending ambitions, but it would be wise to move gradually. Even with perfect hires, accounting conventions punish companies that try to scale up lending too quickly, as highlighted by the recent travails of New York-listed Klarna.

The second supposed benefit from the new licence is the prestige it confers. There was a widespread view that Revolut’s expansion in countries including the US and India could be held back as international regulators waited for a seal of approval from the Bank of England’s Prudential Regulation Authority.

This may be true, but it was something of a self-inflicted problem. Revolut’s lack of a banking licence was an issue because everybody knew it wanted one. Had chief executive Nik Storonsky never declared it a requirement, there need not have been a problem. The lack of a banking licence has not stopped Chime from acquiring 9.5mn active users in the US.

The defining feature of a bank, from a regulatory stance, is that it holds customer deposits directly and those deposits are guaranteed under the Financial Services Compensation Scheme. That reassurance should make customers more willing to keep larger amounts in their accounts regardless of new products. 


At the end of its last financial year, Revolut’s average customer balance was about £575, compared with roughly £1,400 at Monzo and more than £20,000 at NatWest. Convincing users to abandon their other banks is a tough task but Revolut’s customer numbers are so high that even partially closing the gap would make a big difference.

Say Revolut could lift its average balance from £575 to £1,000. With 13mn UK customers, that would represent an incremental £5.5bn in deposits. At current interest rates, that’s an additional £200mn in annual interest income just from parking them in the Bank of England. In practice, higher deposits would likely also lead to higher transaction income as customers use their cards more frequently.

Staying still and waiting for profit to rise has not been Revolut’s strategy so far. Storonsky is a notoriously hard worker. But after a four-year pursuit, even he might be open to slowing down for a minute.

>>> BYD — THE GLOBAL CONSOLIDATOR - M&A Strategy, Target Identification & Valuat



From: Laurent Chekroun (MAKOR CAPITAL MARKET) At: 03/15/26 09:41:19 UTC+1:00
Subject: >>> BYD — THE GLOBAL CONSOLIDATOR - M&A Strategy, Target Identification & Valuat
BYD — THE GLOBAL CONSOLIDATOR
M&A Strategy, Target Identification & Valuation | March 15, 2026

Stella Li (BYD EVP) confirmed in São Paulo the group is open to acquiring legacy OEMs. We have been through the targets, the numbers, and the politics. Here is what matters.

▎THE OPPORTUNITY
• NSANY — Primary target. 0.26x P/BV, mkt cap ~$8.3bn, TTM rev $76.5bn. No white knight post-Honda collapse. Even ex-M&A, this is the most compelling distressed-industrial setup in global auto right now.
• Opel / Vauxhall (Stellantis) — EU brownfield play. Bypasses the 45% EU tariff wall on Chinese-built EVs. Stellantis at 0.28x P/BV. Bloomberg confirmed Xiaomi/Xpeng talks 12-Mar — BYD is the logical next call.
• Maserati — Brand optionality at ~€1-2bn. Geely/Lotus playbook. <7 cars/day at Modena.

▎THE CONSTRAINT — AND WHY MOST NOTES GET THIS WRONG
Political risk is the central variable, not valuation. Three factors that kill outright acquisition:
1. Employment — 5.5M jobs in Japanese auto alone (8% of workforce). Every politician in Yokohama, Sunderland and Smyrna (TN) is a veto point.
2. Regulatory — METI Economic Security Act (JP), EU Foreign Subsidies Regulation, UK NSI Act 2022, US connected vehicle ban 2027. All operational, all apply to BYD.
3. Dealer networks — 6,000+ Nissan outlets across 160 markets. Organised opposition, direct legislative access. Geely spent 18 months fighting Swedish dealers on Volvo.
Our call: outright acquisition probability <15% in 3 years. Asset-level deals (plants, minority stakes, IP licensing) are the realistic path — but deliver a fraction of the strategic value.

▎NOT IN PLAY — REGARDLESS OF VALUATION
• Renault — French state 15% stake, €7.4bn auto net cash, not a distressed seller. Tech partnership candidate, not M&A target.
• Toyota, VW, Hyundai — Political blockers are structural, not cyclical.

▎THE TRADE
Long NSANY on distressed value (0.26x P/BV is the floor thesis — M&A optionality is a free option on top). Watch STLA European asset separation announcements for the Opel catalyst.

Full PDF note attached — includes political opposition deep dive and original Electrek source article.

Laurent Chekroun
For professional investors only. Not investment advice.

>>> THE GREAT DISPLACEMENT — AI as Labour Substitution



From: Laurent Chekroun (MAKOR CAPITAL MARKET) At: 03/15/26 08:26:17 UTC+1:00
Subject: >>> THE GREAT DISPLACEMENT — AI as Labour Substitution
THE GREAT DISPLACEMENT — AI as Labour Substitution

Laurent Chekroun — 15 March 2026

The investment podcast insight that prompted this note: AI revenue growth at OpenAI and Anthropic is not a proxy for rising IT budgets. It is a proxy for corporate labour cost reduction.

OpenAI: $25B annualised run rate (Feb 2026). Anthropic: $19B ARR (Mar 2026), growing 10x per year. Neither figure is explained by incremental IT spend — global IT budgets are growing at +1.8% in real terms. The differential is being funded by internal reallocation, including from headcount.

Key data points in the note:

— MIT (Nov 2025): AI already cost-competitive with 11.7% of the US workforce — $1.2 trillion in addressable wage value
— 55,000 US layoffs directly attributed to AI in 2025 (Challenger, Gray & Christmas), 12x the 2023 figure
— S&P 500 net margins at 13.2% — highest since 2009, with GS estimating +4pp potential over 10 years from AI productivity
— Klarna case study: 853 FTE-equivalents replaced — then partially reversed after service quality fell. The cautionary tale is in the note.

The note covers: revenue data (verified, ARR vs booked revenue distinction); the IT budget argument examined and corrected; sector-by-sector productivity analysis; and a full trades section — long ideas (GS, MSFT, AVGO, financial services basket, power infrastructure), short ideas (BPO, legacy EdTech), and macro hedges (white-collar unemployment tail, capex bubble puts, BLS straddles).

Phase 1 of the AI trade was infrastructure. Phase 2 belongs to the productivity beneficiaries.

Note attached. Happy to discuss.

Laurent Chekroun
15 March 2026

WSJ : Oil Industry Warns Trump Administration That Fuel Crunch Will Likely Worse

Oil Industry Warns Trump Administration That Fuel Crunch Will Likely Worsen
Oil executives told officials in White House meetings the closure of the Strait of Hormuz may push up oil prices further

  • American oil executives warned Trump officials that the Iran war’s disruption of the Strait of Hormuz will worsen the energy crisis.
  • The White House is considering easing Russian oil sanctions and releasing 400 million barrels of emergency reserves to lower prices.
  • Oil executives fear current options won't stem the crisis, while U.S. officials discussed increasing Venezuelan oil production.

American oil executives delivered a bleak message to Trump officials in recent days: The energy crisis the Iran war has unleashed is likely to get worse.

In a series of White House meetings Wednesday and recent conversations with Energy Secretary Chris Wright and Interior Secretary Doug Burgum, the CEOs of Exxon Mobil XOM 1.69%increase; green up pointing triangle, Chevron CVX -0.08%decrease; red down pointing triangle and ConocoPhillips COP 1.36%increase; green up pointing triangle warned that the disruption to energy flows out of the vital Strait of Hormuz waterway would continue to create volatility in global energy markets, according to people familiar with the matter.

In response to questions from the officials, Exxon CEO Darren Woods said that oil prices could rise past current elevated levels if speculators unexpectedly bid up prices and that markets could see a supply crunch of refined products. Chevron CEO Mike Wirth and ConocoPhillips CEO Ryan Lance also conveyed their concerns about the scale of the disruption, these people said.

President Trump didn’t attend the Wednesday meetings. U.S. oil prices have climbed from $87 a barrel that day to $99 a barrel Friday.

The White House has implemented or is considering several measures it hopes will lower oil prices—including further easing sanctions on Russian oil, a massive release of emergency energy reserves and possibly waiving a statute that limits crude flows between U.S. ports. Administration officials have also told oil chief executives that they are hoping to increase the flow of oil between Venezuela and the U.S., a White House official said.

Burgum said the administration has been “working around the clock” with energy companies to stabilize global energy markets. Wright and the Trump administration will continue to take action to minimize disruptions to energy supplies, Energy Department spokesman Ben Dietderich said.

The meetings were described as productive, and none of the executives blamed the Trump administration for the crisis. But many in the oil industry fear that the menu of options available can do little to stem the crisis and that the only solution is to reopen the Strait of Hormuz, through which flows a fifth of the world’s daily supply of oil and liquefied natural gas. Otherwise, the strain of prolonged high prices could weigh on the global economy and crimp fuel demand.

“The world does not need $120 oil,” said Steven Pruett, chief executive of Midland, Texas-based oil producer Elevation Resources. “It’s going to cause economic destruction.”

A senior administration official said that the administration knows prices are going to continue to rise but there isn’t a lot it can do at the moment. The Pentagon has told the administration that options exist to open the strait, and the administration wants that to happen in a matter of weeks, not months, the person said.

Iran’s attacks on ships are surging in and around the narrow strait and the U.S. oil benchmark is currently hovering around $99 a barrel. Announcements this past week that the U.S. would ease sanctions on Russia and contribute to the largest-ever emergency oil release—some 400 million barrels—have done little to quell prices.

“We do crisis management exercises…the big one has always been something in the Middle East that shuts the Strait of Hormuz,” Wirth said this past week on the “Ruthless Podcast.” “Markets are very uncomfortable, uncertain, volatile and unpredictable.”

Some oil executives say they are bracing for a prolonged period of high oil prices that may boost their profits in the short term but could ultimately damage the industry and the economy.

Trump in a Truth Social post on Thursday played down concerns about higher energy prices, saying that the U.S. is the world’s largest oil producer, “so when oil prices go up, we make a lot of money.”

For the past decade, the U.S. oil industry has tried to break the cycle of booms and busts that has plagued it for much of its existence. While prices topping $100 a barrel benefit producers in the short-term, these levels hurt consumers in the long-term and prompt them to consume less fuel, which in turn can cause a steep drop in crude prices. Producers then have to slash production, cut costs and fire staff. Investors have pressured them to keep spending in check and not chase higher oil prices.

Burgum said in a recent CNBC interview that he had met with American companies recently and that he expected them to announce increased production in response to higher prices. But any domestic production increases are likely to be modest, industry executives say, and won’t replace the roughly 9 million to 10 million barrels of oil a day analysts say are currently trapped behind the Strait of Hormuz.

“The big boys are maintaining discipline and returning cash to shareholders, or buying back stock,” said Mike Oestmann, CEO of Tall City Exploration in Midland.

In the past two weeks, U.S. officials including Burgum have had discussions with Exxon and ConocoPhillips about returning to Venezuela to invest billions into the Latin American country’s dilapidated oil fields, the White House official said.

Trump hosted oil executives at the White House after the operation to capture Nicolás Maduro in January to discuss increasing oil production in Venezuela. But CEOs initially responded tepidly to Trump’s demands that they invest billions of dollars there.

Trump’s lieutenants want to use Venezuela’s oil to help shore up fuel-supply chains in the Western Hemisphere, according to the White House official. Exxon has told the Trump administration that it is evaluating the prospect of sending a technical team to that country later this month. Chevron, the only major U.S. oil company active in Venezuela, told U.S. officials earlier this month that its oil production in the country has reached record levels and that it is aiming to pump more, this official said.

Exxon and ConocoPhillips pulled out of Venezuela in 2007 after then-President Hugo Chávez nationalized their assets. Both are trying to recoup billions they are still owed.

WSJ : OpenAI’s Bid to Allow X-rated Talk Is Freaking Out Its Own Advisers

OpenAI’s Bid to Allow X-rated Talk Is Freaking Out Its Own Advisers
Warnings surface that the company risks creating a ‘sexy suicide coach’ if it begins allowing sexually explicit chats

  • OpenAI delayed the launch of its “adult mode” for ChatGPT, which would allow erotic conversations, due to internal concerns and technical challenges.
  • Advisers and staffers warned that AI erotica could foster unhealthy emotional dependence and allow minors to access sex chats.
  • An age-prediction system was at one point misclassifying minors as adults about 12% of the time.

In January, OpenAI’s handpicked council of advisers on well-being and AI met with the company’s representatives for an update about a controversial new feature called “adult mode.”

Citing the need to “treat adult users like adults,” OpenAI Chief Executive Sam Altman had last year floated the idea of enabling erotic conversation in its ChatGPT chatbot and dropping its ban on such X-rated content.

The plan sparked vigorous debate internally over the potential risks. Council members, with backgrounds in fields like psychology and cognitive neuroscience, had also expressed strong reservations.

Then OpenAI dropped a bombshell: Despite the concerns, it was forging ahead with its erotica plans.

When they assembled for the January meeting, council members were unanimous—and furious. They warned that AI-powered erotica could foster unhealthy emotional dependence on ChatGPT for users and that minors could find ways to access sex chats, according to people familiar with the matter.

The people said that one council member, citing cases where ChatGPT users have taken their own lives after developing intense bonds with the bot, claimed that OpenAI risked creating a “sexy suicide coach.”

The debate is the latest flashpoint in the continuing conversation about how to anticipate the potential positive and negative impacts of AI on the economy, society and individuals.

In proposing to allow sexually explicit conversations with its popular chatbot, OpenAI exposed fractures over how to balance rapid user growth and digital freedom with safety and child protection—issues that many believe were belatedly confronted when social media made its debut a generation ago.

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Earlier this month, OpenAI announced it would delay the launch of adult mode, previously slated for the first quarter, saying it was prioritizing other products. The change was also due in part to internal concerns and technical challenges, the people said. But the company made clear it does plan to release it eventually.

One issue the company is tackling: its new age-prediction system aimed at keeping minors from having adult-themed chats was at one point misclassifying minors as adults about 12% of the time, people familiar with the matter said. That error rate could allow millions of the company’s approximately 100 million under-18 users each week into erotic chats.

The company has also wrestled with how to lift ChatGPT’s restrictions on erotica while still blocking scenarios that the company wants to keep off limits, like those featuring nonconsensual behavior or child sexual abuse, the people added. When the adult mode launches, OpenAI plans to allow text conversations but restrict ChatGPT’s ability to generate erotic images, voice or video.

Even within those limits, OpenAI staffers have identified several risks, including the potential for compulsive use, emotional overreliance on the chatbot, a drive toward more extreme or taboo content and crowding out offline social and romantic relationships, according to documents reviewed by The Wall Street Journal.

An OpenAI spokeswoman described its plan as allowing ChatGPT to generate textual chats with adult themes, describing it as smut rather than pornography. The spokeswoman added that the company’s age prediction algorithms show performance similar to the rest of the industry, but will never be completely foolproof.

OpenAI also trains its models not to encourage exclusive relationships with users, and to remind users that they need to have relationships in the real world, the spokeswoman added.

The company, which has hired mental health experts and built out a youth well-being team, added that it has a developed plan to monitor for a range of potential long-term effects of adult mode, both positive and negative.

Altman’s plans to roll out adult mode come at a challenging time for his company. Its technological lead over rival AI players has diminished as it competes to attract users and funding. The company’s financial losses are mounting, and multiple lawsuits allege ChatGPT contributed to harms for users and others.

Frontiers of tech
Sexual content has long been an early feature of new technologies—from photography, to the web, to virtual reality. The same has been true for AI. Companies including Character.AI have launched chatbots that have developed intimate relationships with users, and the pornography industry has adopted generative AI to create adult entertainment.

Big tech companies have had a complicated relationship with explicit content, trying to balance the libertarian ethos of Silicon Valley with the demands of advertising-supported businesses and the imperative of protecting minors online. Meta Platforms prohibits nudity and sexual activity on Facebook and Instagram. Alphabet’s YouTube bans explicit content meant to be sexually gratifying, and Google search blurs explicit images in its results by default.

As they grapple with where to draw boundaries around AI, Elon Musk’s xAI has been among the more permissive. It built a sexily clad avatar named Ani into its Grok chatbot, which led to criticism when users were able to use it to digitally undress images of people. Musk later said he would restrict the feature to paying users rather than making it available to all.

On Thursday Musk said on X that Grok’s video-generation tool would start allowing generation of content that would be “allowed in an R-rated movie.”

Meta allows its AI chatbot to engage in romantic role play, the Journal has reported, but the company said the feature isn’t available to accounts registered to minors. The company said it is also building parental controls for its AI characters.

OpenAI officials, for their part, have said they don’t feel comfortable banning sexual content for adults. Some OpenAI staffers have expressed concern that blocking erotic chats relies on similar logic that in the past was used to ban topics that were previously culturally taboo, such as LGBT content. Altman has also suggested that allowing explicit content would likely juice growth and produce extra revenue.

OpenAI’s first brushes with sexual chats came more than a year before releasing the ChatGPT chatbot interface. In early 2021, executives noticed that a large portion of the traffic for one of OpenAI’s business customers, a text-based choose-your-own adventure game called AI Dungeon, wasn’t appropriate for work, people familiar with the matter said.

AI Dungeon sometimes steered users into themes of violent sexual exploitation without the user prompting it, the people said. Other times, when a user prompted the game with “tame” sexual themes, AI Dungeon would escalate the conversation into a much more intense sexual exchange, the people said.

Erotic role play also proliferated on a clunky OpenAI interface for developers before the company launched ChatGPT. Sometimes, the AI would insert sexual themes into conversations that users weren’t seeking: if a user described a man and his daughter entering a room, an “uncomfortable amount of the time” the AI would proceed to depict a scenario involving incest, one of the people said.

These incidents forced OpenAI’s executives to reckon with the existence of AI erotica on their platform, and sometimes, themes of sexual violence and child exploitation. They then removed AI Dungeon from the platform.

Mental-health experts warn that teens in particular may not be prepared to handle romantic or sexual exchanges with chatbots. In testing conducted by child-safety nonprofit Common Sense Media late last year and earlier this year, both Grok and Meta AI sometimes sent explicit or sexualized content to teens.

In some cases, sexual chats with teens have had tragic consequences. In late 2024, Sewell Setzer, a 14-year-old boy in Florida, killed himself at the prompting of a chatbot from Character.AI with whom he was in love and shared explicit chats, according to a lawsuit filed by his mother. The company later blocked teens from accessing open-ended chats and settled the lawsuit.

Warning signs
Around 2021, OpenAI’s employees working on safety issues were starting to see warning signs around the mental health of some of the people who spent long periods of time using AI. At the time, OpenAI’s safety employees relied on tools to moderate content that were too blunt to draw clear lines between types of erotica the company wanted to allow, such as mainstream smut, and the stuff the company considered off limits, such as nonconsensual depictions, descriptions involving minors and other illegal content.

Employees also feared that if they allowed erotica, the draw of that type of conversation might subsume the platform’s other use cases. “We didn’t want to be just an erotica company,” one former employee recalled.

OpenAI safety employees formalized these ideas into some of the company’s first content policies in late 2021. For the first time, OpenAI forbade erotic content.

When OpenAI released ChatGPT in the fall of 2022, the AI model powering it was trained to refuse requests that violated the company’s rules, including ones that asked for AI erotica. And since then, OpenAI’s policy has been to ban erotic content, though the company has since mid 2024 said it is exploring how to allow erotica and other NSFW, or not-safe-for-work, content in “age-appropriate contexts.”

At times staffers have questioned the erotica ban. In 2024, a faction of OpenAI employees and executives again raised the idea of getting into racier content, and suggested a raft of porn-related products. Other employees pushed back, saying they feared OpenAI was already struggling with a lot of the core areas they wanted to be able to offer safely, especially around the mental health of their users. The AI porn product ideas fizzled.

Altman has also expressed conflicted feelings about AI erotica. When asked on a podcast in August if there were decisions he had made that were “best for the world, but not best for winning,” Altman replied: “We haven’t put a sex bot avatar in ChatGPT yet.”

Altman indicated erotica would boost growth and revenue, but said it wouldn’t align with his company’s long-term incentive of serving users. “I’m proud of the company and how little we get distracted by that,” Altman said. “But sometimes we do get tempted.”

Two months later, Altman appears to have succumbed to temptation. On X, he posted that his company had managed to mitigate serious mental-health issues related to chatbots, and had new tools to police content. That’s when he said his company would launch erotica in December.

Internally, Altman’s post blindsided OpenAI staffers and executives. Altman hadn’t told staff about the post, which he made just hours after OpenAI unveiled its advisory council on well-being. In that announcement, the company had said the council would “help define what healthy interactions with AI should look like for all ages.”

The next day, Altman clarified that mental health safeguards for teens wouldn’t be reduced. But he doubled down on allowing adults to have spicy conversations with his chatbot.

We “aren’t the elected moral police of the world,” Altman wrote. “In the same way that society differentiates other appropriate boundaries (R-rated movies, for example) we want to do a similar thing here.”

After Altman’s announcement, OpenAI employees soon realized a December launch would be hard to achieve. The company had pledged to release a system to guess users’ ages before releasing adult mode, so that it could keep minors from triggering erotic sexual chats. But the company decided to do a slow rollout of that system in an effort to improve its accuracy, Fidji Simo, OpenAI’s chief executive of applications, said in a December podcast interview.

Since then however, internal and external concerns about the AI erotica have festered. Some staffers said they didn’t think OpenAI’s safety tools were ready, for instance to lock out prohibited content, like child abuse. Others said OpenAI was bending to financial incentives to try to make people attached to its models, people familiar with their thinking said.

OpenAI has been busy in recent weeks with the fast-changing AI market. In early February, the company released a new version of its large language model, and at the end of the month it swooped in to sign a deal with the Pentagon just after the Department of Defense said it would stop working with rival Anthropic.

In announcing the delay of adult mode, the company said it would focus instead on things like ChatGPT’s personality and personalization of the chatbot for users. Internally, officials have said the delay of adult mode could be at least a month.

“We still believe in the principle of treating adults like adults,” the company said, “but getting the experience right will take more time.”

WSJ : Top Apollo Executive Sounds Off on ‘Arrogance’ in Private Markets

Top Apollo Executive Sounds Off on ‘Arrogance’ in Private Markets
‘I literally think all the marks are wrong,’ Apollo’s John Zito said of private equity in previously unreported comments; Apollo says comment was about software companies.

Executives at the biggest private-credit lenders have sought to play down an exodus of investor money from their funds, making carefully worded television appearances to calm jitters about the sector. Apollo Global Management’s APO 4.13%increase; green up pointing triangle John Zito, co-president of the firm’s asset-management arm that is one of private-credit’s largest players, spoke more bluntly in a previously unreported discussion UBS UBS -1.52%decrease; red down pointing triangle arranged for some of its clients late last month.

Zito called out “arrogance” in private markets, predicted a private-credit loan made to a generic small or midsize “Joe Software Company” might recover 20 to 40 cents on the dollar and said Federal Reserve Chairman Jerome Powell is needling President Trump with his inflation commentary, according to audio recordings of the comments reviewed by The Wall Street Journal.

Zito also detailed why he believes his own firm’s private-credit business is on solid footing, joining a chorus of similar comments from his peers. UBS declined to comment.

On private credit’s recent stumbles
He blamed the media for creating a frenzy around private credit:

“Obviously we’re in the middle of a private credit party, apparently . . . if you do credit well, it’s supposed to be pretty boring . . . If you do stupid things and you do concentrated things, and you do things that you’re not supposed to do in your vehicle, you probably will have a bad ending.”

Zito talked about the selloff in shares of large software companies, which was largely sparked by fears about artificial intelligence. He cautioned that smaller software companies bought by private equity, many with private-credit loans, could face even more challenging conditions. Those dismissing concerns by pointing to strong results from public companies are missing the point, he said.

“I’m not as rosy and I’m not as confident in what will happen with the technology. Anyone who tells you that . . . the earnings last quarter were really good so all is good, anyone who says that clearly doesn’t understand . . . Most of the businesses that were bought from 2018 to 2022 are lower quality than those companies, smaller than those companies and were trading at a much higher valuation than those companies and so I am concerned about many of [those] take-privates.”

He pointed to Thoma Bravo’s 2021 $6.4 billion take-private of the software firm Medallia in particular. Several lenders to Medallia including Apollo have already written down its debt.

“There will be an issue . . . with respect to that credit, which I think will be worse than people expect.”

Thoma Bravo declined to comment.

Zito noted that he expects private-credit loans originated in the next 12-18 months to be “much better vintage” as it relates to “quality of company, amount of leverage, documentation, spread.”

He also weighed in on redemptions and whether private-credit managers should enforce limits, typically 5% of funds’ shares each quarter, or allow more investors to cash out when they are flooded with requests. It is a topic he and others on Wall Street have recently been asked about as funds take different approaches.

“You’re going to see elevated redemptions for a handful of quarters. I don’t know how long it lasts.”

“Making a decision in one quarter may be the right, like, decision for fundraising in the near-term and then a quarter later, you’ll realize it was a really bad decision. So my overall bias is to stick to the 5% to protect all my existing investors.”

On vulnerabilities in private equity

Zito sought to shift the focus to private equity, where Apollo has less exposure than most of its peers. He suggested investors’ voracious demand for buying stakes in existing private-equity investments but wariness of the private debt underpinning those deals doesn’t add up, since the equity would be junior to the debt if there were major problems with these assets.

“There’s . . . unlimited demand for secondary private equity but they are worried about private credit which finances 80% of those portfolios . . . I can’t compute, but I’m the dumb guy. I don’t understand. I start saying this and I get these blank stares back at me like OK, I don’t know.”

(Some might say private-equity funds are built assuming some bad deals and some home runs, while credit funds tend to be designed to deliver predictable returns.) Asked where he sees the pain in Apollo’s private-equity portfolio or those of other firms, Zito said:

“I literally think all the marks are wrong. Is that what you’re asking me? I think private-equity marks are wrong.”

An Apollo spokeswoman said Zito was referring to software companies and added, “We believe software valuations do not yet reflect first-quarter market conditions.” Zito pointed out in the appearance that Apollo has very low exposure to software companies. Asked when the market will see private-equity markdowns, he said:

“This next cycle is going to be a big moment in time for the private markets because people are way smarter than I think private-market participants, particularly people in the wealth channel. Like, I kind of sense an arrogance of the people who grew up in the private-markets business . . . If you don’t mark your book, I think you actually lose trust with the clients . . . We are going to be a market leader in actually marking our book.”

On the economy and markets
“I think it’s more likely than not that we go into a recession . . . [a] consumer confidence-led recession. Most of [the companies we lend to] are getting a lot of pressure to show clear AI execution . . . It’s forcing people to do stuff before the actual technology works . . . that’s going to be the first step of just a slowdown in the broader economy.”

He paused to verify that the event was off-the-record before commenting on Powell, who has had a public battle with Trump and is set to be succeeded by Kevin Warsh atop the Federal Reserve:

“I literally think Powell, he’s so upset at how it’s ending that he’s just saying there’s inflation everyday to piss off the president, like I literally think that’s what’s going on, and so it’s hard for me to see inflation. I don’t see it anywhere. I see it much more deflationary. I think that technology is attacking every profit pool.”
Zito on the economy and Powell

A Federal Reserve spokesman declined to comment and a White House spokeswoman didn’t respond to a request for comment.

Asked why a popular high-yield corporate bond ETF seen as a benchmark for such debt that is typically under pressure in an economic crunch was relatively flat for the year despite all the noise, Zito responded:

“I don’t have any idea . . . The amount of dispersion going on beneath the surface is kinda crazy. I literally, at home, I told my wife last night . . . I feel like the market should be down at least 10 [%], and it’s flat or up.”

On Apollo’s credit business
Zito made a plug for Apollo, which has transformed itself and now generates most of its profits from originating and investing in debt. The firm has done so using complex financial maneuvers, like creating investment-grade debt backed by shares in hard assets such as microchip factories.

“On our balance sheet, we are 95% [investment-grade], private and public [investment-grade] . . . I have a view that bigger companies are going to do better than smaller companies and so I’ve tried to position ourselves in the most thoughtful way. But inevitably, if we’re in a really bad recession . . . I’m certain we’ll have nicks as well as other people, but I think we’re going to come out of it much, much better and I think we are going to be able to have the flexibility to buy stuff over that time period that makes us significant amounts of capital.”

WSJ : China’s Economy Off to Steady Start in 2026 Amid Lowered Expectations

China’s Economy Off to Steady Start in 2026 Amid Lowered Expectations
Better-than-expected performance in first two months of year opens space for Beijing to pursue goal of shifting toward consumption-led growth

  • China said its economy began the year on a steady footing, providing leaders room to try to shift the country’s growth engine toward consumption.
  • Retail sales increased 2.8%, fixed-asset investment rose 1.8%, and industrial output grew 6.3% in the January-February period.
  • Data on the property sector continued to show signs of weakness.

BEIJING—China said its economy started the year on a steady footing, giving leaders more breathing room to try to shift the country’s growth engine toward consumption just days after lowering its official growth target for the year.

Readings on retail sales, fixed-asset investment and industrial output all came in roughly in line with expectations in January and February, though data on the property sector continued to show signs of weakness.

China’s National Bureau of Statistics combines January and February data to iron out distortions stemming from the shifting timing of the annual Lunar New Year holiday.

Monday’s figures came on the heels of Beijing earlier this month setting its lowest growth target in more than three decades. The decision to target gross domestic product growth of between 4.5% and 5% this year, compared with its recent practice of aiming for growth of “around 5%,” has been welcomed as a signal that policymakers are more serious about steering the economy toward consumption-driven growth and away from debt-fueled investment.

“A lower growth target allows officials to focus on the structural problems facing the economy, such as high levels of local government debt, low household spending, and a national market plagued by internal barriers to trade and investment,” analysts at Trivium China told clients in a recent note.

Tolerating a slower rate of growth gives policymakers more space to reduce overcapacity, weed out unprofitable companies and cut back on investments that are made purely to meet a growth target, said Allan von Mehren, China economist at Danske Bank.

As growth slows, scaling back debt-fueled manufacturing will mechanically raise consumption’s share of the broader economy, economists say. However, without additional stimulus planned for this year, they remain skeptical over how successful policymakers will be in persuading cautious Chinese consumers to spend more in the near term as a yearslong property slump drags on.

Beijing’s continued push for a stronger social safety net will eventually pay dividends, but the piecemeal annual improvements simply won’t move the needle on consumer spending in the short term. The Chinese leadership’s determination to bolster technological self-sufficiency also clouds their vision of China becoming “a mega-sized consumption powerhouse.”

For this year, Danske Bank’s von Mehren expects growth again to be mostly driven by robust exports and investments in technology, green energy and “smart infrastructure” projects.

The robust export momentum is already evident; official figures showed a surge in China’s outbound shipments at the start of this year, highlighting the continued strength of its export sector ahead of President Trump’s visit to Beijing later this month.

As Chinese officials gear up for a planned summit between Trump and Chinese leader Xi Jinping, Beijing is closely watching the unfolding conflict in the Middle East and its impact on the Chinese economy amid a tumultuous global energy market.

While higher commodity costs will likely help drive China’s headline price measures out of their long run of deflation in the coming months, analysts at Gavekal Dragonomics caution that this kind of cost-push inflation in an environment of weak demand threatens China’s corporate margins, investment and inflation-adjusted growth rate.

Retail sales, a gauge of consumption, increased 2.8% on the year in the January-February period, China’s statistics bureau said Monday. That handily topped the 0.9% growth rate recorded in December, and was roughly in line with the 3.0% increase projected in a Wall Street Journal poll.

Fixed-asset investment rose 1.8% on year in the first two months of the year, better than expected and a big improvement from the 3.8% decline recorded in 2025. Meanwhile, industrial output rose 6.3% during the same period when compared with the year-earlier period, better than expectations.

China’s real-estate sector suffered significant declines in the first two months of the year. Property investment fell 11% in year-over-year terms, while the total value of home sales dropped by 22% during the same period.

China’s headline measure of joblessness, the so-called urban unemployment rate, rose to 5.3% in February, from January’s 5.2% rate.

TechCrunch : Wiz investor unpacks Google’s $32B acquisition

Wiz investor unpacks Google’s $32B acquisition

Google closed its $32 billion acquisition of cybersecurity company Wiz this week — the biggest acquisition in Google’s history, as well as the largest ever acquisition of a venture-backed startup.

On the latest episode of TechCrunch’s Equity podcast, Rebecca Bellan, Sean O’Kane, and I were joined by Shardul Shah, a partner at Wiz’s largest shareholder Index Ventures. Shah walked us through his history with Wiz, which extends before Wiz itself — he previously backed Adallom, the startup previously founded by Wiz’s Assaf Rappaport, Ami Luttwak, and Roy Reznik.

We also asked Shah about why he thinks the company was such an appealing acquisition target, and how he responded when Wiz walked away from Google’s previous acquisition offer.

“It’s no surprise that it’s Wiz,” Shah said. “Wiz is at the center of three tailwinds: AI, cloud, and security spend.”

Read an excerpt of our conversation, edited for length and clarity, below. Shah kicked things off by noting, half-jokingly, that we may have been underselling things by calling the acquisition one of our deals of the week.

Shardul Shah: I think this should qualify as deal of the year or decade, not just the week. Can we change that? Thank you.

But it is really important for the industry. This is the largest venture-backed acquisition in history.

Rebecca Bellan: Yeah, we’ll work that out in post[-production].

Shardul: And more critically, it’s no surprise that it’s Wiz. Wiz is at the center of three tailwinds: AI, cloud, and security spend. And those are central today in light of the AI era where every single workload needs to be secured. So we’re super proud that we were the largest shareholder in the company. And yes, I think it’s at least [the] deal of the month.

Rebecca: So how long has it been? When did you initially invest in Wiz? Because this is the kind of exit that I’m sure investors dream about.

Shardul: Is it six years or 16, is a question for us internally. About 10 years ago, I joined the board of Assaf, Roy, and Ami first company, Adallom. So we got a front row seat at how they make decisions, how they develop trust and how that evolved over time.

Assaf called me on my birthday when he started Wiz. And the seed round is when I joined the board.

Anthony Ha: So, we’ve talked about this deal a couple of times before on the show, but because Wiz isn’t a consumer-facing company, I’m guessing some of our readers are familiar with it, some of it are not. Can you talk a little bit more about what it was — beyond just sitting at the intersection of these really important sectors — that you think made Wiz both an appealing investment and then eventually such an appealing acquisition target?

Shardul: At Index, the core of our business is to focus on people. And I really think the core of the acquisition was the people. Assaf is this incredible leader who can make high quality judgment calls. He’s got great intuition about people and markets. Two of his co-founders, Ami and Yinon [Costica], are almost always in contention — Ami lives in the future, [Yinon] is very, very present and Assaf has the ability to really make a decision on which voice, in which moment, might lead the way. Roy is an execution machine.

So together, they created this environment and culture of trust that allowed them to build a platform from the get-go and take on an existing category with unrivaled speed.

Sean O’Kane: There’s this fun history — fun for us, especially because we got to push them on it at Disrupt a couple of years ago, where Google approached the company and [Assaf] actually walked away from the deal. In that moment, does that almost feel validating for you, as someone who feels like you’ve identified somebody who you truly believe in and is willing to take a step that I think a lot of people would be afraid to take, in the face of such a big, at the time, exit? Maybe not as big as now, but pretty close.

Shardul: Not really. Some of it is probably because I’m irreverent and external validation doesn’t matter, despite my insecurity about you describing this as deal of the week.

I did tell the founders at one point, I think I believe in them more than I believe in themselves. The first blog I ever wrote for Index was titled “Learning to Say No,” actually directed at the Audible founders. […] When founders choose and make decisions, you trust the inputs, like how they make decisions. You don’t really concentrate on the outputs and the luck that goes into whether it’s validated or not.

Rebecca: How important was that in the acquisition of Wiz? Basically, that it’s getting what it can get from Google — funds, access to [Google’s] cloud, and more resources, but still able to maintain its own sense of leadership?

Shardul: So to your point, maybe for the audience, Wiz aims to secure cloud infrastructure and code in production. Most of their customers are part of what’s called a zero critical club, they have the context to know what to prioritize and what to act on. Google’s resources, the infrastructure, the AI talent they have, allows Wiz to extend that recognition while retaining this culture of trust and camaraderie.

Anthony: When we think about important acquisitions, they can be important in a number of different ways. They can be transformative for the acquiring company. They can also be transformative to the startup ecosystem because there’s a lot of people who are going to make a lot of money from this. And then that potentially starts whole new industries, whole new startups.

So when you think about this as a big acquisition, what do you think are going to be the biggest impacts over the next few years?

Shardul: I think it starts with inspiration. I think there’s a new imagination for what can be possible for entrepreneurs across the globe. And that’s amazing, right?

I’m really proud that there’s so many people whose lives will change as a function of this investment, that’s really meaningful and fulfilling. But I think what’s more important is the talent, the skills, and the aspirations of entrepreneurs. So we can’t wait to see what the limits are for the next generation.

The Information : Figma and HubSpot CEOs Say They Aren’t Fazed by Risks From AI

Figma and HubSpot CEOs Say They Aren’t Fazed by Risks From AI Agents. Their Disclosures Say Otherwise

The Takeaway
  • Many software executives have yet to publicly comment about the implications of superagents, also known as computer-using agents.
  • Twenty-seven software firms cited AI agents as a competitive risk this year.
  • AI agents could replicate apps or reduce their power.


Leaders at enterprise app makers such as Figma, Workday and HubSpot have downplayed threats from AI that could crimp their growth, a concern that has pressured their stocks for months. But the securities filings those leaders sign every quarter are beginning to note the competitive risks the companies face from AI agents, which their customers could use to replicate their apps or draw data from them.

So far this year, 27 software firms, including the three just mentioned, have described AI agents as a competitive risk in their securities filings, up from the seven that disclosed such risks in the same period last year, according to The Information’s analysis of filings using AlphaSense, a market research platform.

Design app Figma is arguably under the most pressure among software as a service firms, with its stock trading lower than its initial public offering price last year, in part due to concerns about its sales growth. In its 10-K filing with the Securities and Exchange Commission last month, Figma said agentic AI “may change how people access and interact with digital products in ways that reduce reliance on traditional software applications.”

On an earnings call the same day, Figma CEO Dylan Field brushed aside a question about whether AI agents will disrupt the industry for web design software.

“I think it is the case that humans will continue to use software, and increasingly, agents will, too,” he said. “And I’m excited about that.”

Field warned customers about using AI for important work. “I think right now, if you’re willing to hand off mission-critical work to agents and just let them do it unsupervised, you’re a very brave person,” he said. (He’s not wrong about the risks involved, though the comment doesn’t fully address the AI-related competition his company may face long term.)

Most companies have only been talking about AI risks in a general sense so far. Over the past two years, more than 200 software firms’ filings have referenced AI as a risk factor in terms of rising competition, cybersecurity vulnerabilities and regulatory issues. References to AI agents in particular have only just begun to trickle in.

Such dangers have grown as Anthropic, OpenAI and other AI firms have released new products to automate coding and other white-collar tasks. They’re also releasing or developing AI superagents that could use enterprise apps the way humans do—except much faster and in the background—which could lessen the power of the apps’ makers.

Many software executives have yet to publicly comment about the implications of superagents, also known as computer-using agents. Oracle executives, for instance, dodged a question about them in an earnings call last week. Revenue growth from the company’s enterprise apps has been flat for years, even as the executives have been talking up AI’s potential to boost growth for the better part of a year.

Investors are also concerned that if AI agents produce efficiency gains in the business world and slow down hiring, that would impact subscription growth for software app providers. To be sure, plenty of software firms have reported slightly accelerating sales growth lately.

Being Direct

Some software companies’ filings are more direct than others about the risks they face from AI agents, appearing to support investors’ sell-off of software stocks in what’s been dubbed the SaaS apocalypse.

Graphic design provider Adobe said in its annual report in January that it faces “increasing competition from companies offering generative and agentic AI solutions” and could see lower sales if its products don’t compete effectively.

Last week, though, the company’s soon-to-be-departed CEO, Shantanu Narayen, said in a call with investors that the company’s offerings are “uniquely designed” to meet the evolving needs of enterprises in a world filled with AI agents. The stock has tumbled 28% so far this year—even as its AI revenue has begun to surge and as overall sales grew at a slightly faster rate in the company’s first quarter, which ended Feb. 27, than in prior quarters.

During a November 2025 earnings call, HubSpot CEO Yamini Rangan said the firm, a provider of software to manage customer relationships, was “positioned to lead in the AI era and drive durable long-term growth.”

‘Market Differentiation’

HubSpot’s shares, however, have shed nearly half their value in the past six months. The company said sales growth ticked 1 percentage point lower in its quarter ending Dec. 31 compared with the previous quarter.

In its annual filing in February, HubSpot said its customers could build their own internal customer relationship management tools using AI. The company added in the filing, “We must convince [customers] that our products and solutions are superior to other solutions available to their organizations, including generic [large language models], software created using natural language prompts and generative AI (referred to as vibe coding).”

Workday’s annual 10-K filing in early March fed into the fears that its human resources app could become less valuable with the rise of agentic AI tools. The filing acknowledged potential issues in the company’s “ability to maintain market differentiation” and said it “may not be effective in convincing prospective customers that our solutions will address their needs.”


Workday also said its new Flex Credits method of charging customers for using AI agents to access its services “may face customer resistance.” Convincing customers to pay these new agent-related charges will be a critical test for enterprise software firms in the coming years.

If Workday is facing AI threats, its performance doesn’t show that yet. Revenue growth at the HR app maker accelerated by roughly 2 percentage points in the quarter ending Jan. 31 compared to the growth it reported in the previous several quarters. In an earnings call last month, Workday executives voiced their excitement about Flex Credits as a way to monetize the AI agents its customers use to access data from the company’s apps.

“AI is a tailwind for us—it’s absolutely not a headwind,” then-CEO Carl Eschenbach said in January. He stepped down last month.

The disparity between executives’ public comments on earnings calls and the language in their regulatory filings is nothing new. A 2005 mandate by the SEC requiring companies to disclose major risk factors in filings gave leaders legal cover to make more optimistic projections about their companies’ future performance, according to a paper from Review of Accounting Studies.

Other software companies’ filings have talked about threats from their own uses of AI. Microsoft, Zoom and C3.ai, for instance, have written that potential flaws in AI tools they sell could damage their competitive position.