Why Alts Manager Stocks Are Getting Hit Hard

Increased uncertainty about the equity and credit markets tied to fiscal, tariff, and monetary policies and economic growth and increased concerns about the private credit market have sent the stocks of many alternative asset managers sharply lower.

• The private-credit-heavy alternative asset managers—Apollo Global Management APO (86% of fee-earning assets and 72% of base fees), Ares Management ARES (66% and 65%), Blue Owl OWL (53% and 61%), and KKR KKR (48% and 30%)—have been among the hardest hit. Apollo and Blackstone BX are down roughly 12% so far in 2026, Ares has lost 15%, KKR is down just shy of 16%, and Blue Owl is down nearly 18%.
• While not immune to the real and perceived headwinds in the markets, Blackstone, with its more balanced product portfolio (just 34% of fee-earning assets and 25% of base fees come from its credit and insurance segment), has seen its shares decline 12% since the start of the year—no doubt because it is the industry leader and has tended to trade at the highest multiple in the group.
• Meanwhile, Brookfield Asset Management BAM, which benefits from a heavy bent toward real estate/real assets, and Carlyle Group CG, which was coming off a couple of years of weaker performance, have been affected the least. Brookfield is up 1.0% and Carlyle is down 2.4% so far in 2026.

Why Investors Worried About Private Credit

In September 2025, investors started to fret after both Tricolor (a subprime auto lender) and First Brands (an auto parts supplier) collapsed due to unmaintainable debt-fueled expansions, opaque off-balance-sheet financing, and outright fraud allegations. While all the finger-pointing was aimed at private credit, which has become the main lender to riskier borrowers in the aftermath of the global financial crisis, these weren’t really private credit stories.

The bulk of First Brands’ term loan debt originated in the broadly syndicated loan market. While most of First Brands’ syndicated loans were held in the portfolios of business development companies, none of our coverage firms has much exposure. In fact, Apollo correctly anticipated the credit deterioration at both firms and significantly profited from short positions established against their debt.

AI Concerns Weigh on Software Loans

More recently, investors have grown concerned that the growth of artificial intelligence will allow software customers to dispense with their licenses, which would have an adverse effect on alternative asset managers—with some 20% of the private credit industry’s loans the past decade being made to software companies.

At the end of January 2026, software represented the largest sector exposure in the broadly syndicated leveraged loan market, accounting for 13% of the $1.5 trillion outstanding tracked by the Morningstar LSTA US Leveraged Loan Index. Of that total, only $195 billion (or just under 13% of the outstanding loans) was extended to what were considered speculative-grade software borrowers.

Outstanding loans to software issuers expanded 70% between 2020 and 2025, driven largely by a surge in issuance in 2021, amid ultra-low interest rates and a flurry of private equity activity. During 2021, software companies raised a record $54 billion in the BSL market to fund buyouts and other transactions, including $48 billion from sponsored borrowers. The rapid buildup in tech exposure was a key contributor to the 30% expansion in the leveraged loan asset class during 2021-25.

What Are the Risks for Alternative Manager Stocks?

While investors have some reason to be concerned about the potential for bad loans on the books of the alternative asset managers, just as they do with the banks, the loss rates for the private credit industry overall have been more akin to the traditional high-yield bond market over the past several years, with no real discernable uptick in risk or losses.

This is to be expected, as the private credit industry is focused on the higher-risk parts of the market, charging much higher fees and/or requiring better terms in order to extend credit to companies. More importantly, all the credit and loans that the alternative managers are extending are coming from their investment funds and not the companies themselves, so there is no balance sheet risk.

The biggest risk for the alternative asset managers is that a marked increase in loan defaults on the part of their borrowers has an adverse effect on investment performance, which impacts future fundraising and monetizations. On top of that, investors that are spooked by the potential for losses from their private credit investments could start making redemption requests from the funds, which, while slowed by the existence of redemption gates for most funds, would still be a drain on fee-earning AUM.

As a result, most management teams have been on the defensive for the past few weeks, with none pointing to specific risks within their portfolios, but most of them acknowledge that the potential disruption risk within the private credit segment, where rapid AI advancements and technological changes could negatively impact company business models and valuations. That said, the same could be said for the private equity market.

Regarding the software market, Blue Owl noted that its private credit segment’s software borrowers tend to be woven more deeply into their customers’ businesses—mainly companies operating in the more highly regulated financial and healthcare sectors—where it is less likely that they’ll completely forego their operating software to use AI exclusively. The same could probably be said for most of the remainder of the alternative asset managers, which we suspect are a bit more conservative than Blue Owl, which is the smallest of the firms we cover.