Apollo grows bearish on private credit’s hottest trade
During the 2010s boom in private equity and private credit, one type of deal carried the way, turning relatively unknown firms into industry giants.
For years loans to software companies had been virtually non-existent on Wall Street because banks were unwilling to lend against companies without tangible assets or profits under standard accounting principles.
Then, in the wake of the 2008 crisis, software was the epicentre of growth for private credit firms as they took a growing share of lending from regulated banks. Many of the largest private credit funds now hold a quarter to a third of their overall assets in software companies.
But one of the world’s largest private capital groups is growing bearish on the sector.
Apollo is rapidly cutting its exposure to software makers and has shorted software loans, warning of the threat that artificial intelligence poses to software companies, the FT scooped this weekend.
Apollo, with more than $900bn in assets, made bets against the loans of companies, including Internet Brands, SonicWall and Perforce, which are owned by large private investment groups KKR, Francisco Partners and Clearlake, respectively, according to sources briefed on the matter.
Apollo’s short bets in the software sector, which lasted through a large part of 2025, have been closed, said a source briefed on the matter.
The investment group entered 2025 with many of its private credit funds holding roughly 20 per cent exposure to software groups, but it has spent the year cutting its exposure. While Apollo executives believe AI may benefit some companies, they think such directional tech bets are growing in risk.
“Technology change is going to cause massive dislocation in the credit market,” said CEO Marc Rowan at a recent conference. “I don’t know whether that’s going to be enterprise software, which could […] benefit or be destroyed by this. As a lender, I’m not sure I want to be there to find out.”
DD readers may want to watch this one closely. Private markets have been rocked by technological changes before. Few PE-owned companies survived the death of malls or the yellow pages.