Blackstone’s BCRED Outlines AI Risk Framework, Software Exposure
Blackstone Private Credit Fund, or BCRED, a publicly registered non-traded business development company sponsored by Blackstone Inc. (NYSE: BX) focused on direct lending and private credit strategies, has provided insight into how artificial intelligence is influencing its investment strategy, particularly within its significant software portfolio.
BCRED, which maintains a roughly 26% exposure to software as of Dec. 31, 2025, asserts that the impact of AI is not uniform across the sector. The firm emphasized a bifurcated view of the market, distinguishing between companies positioned to thrive and those vulnerable to disruption.
Identifying AI Winners vs. Vulnerable Legacy Tech
According to BCRED, the resilience of a software company in the AI era is dictated by its “moat” – its surrounding critical infrastructure. The firm said it favors companies anchored in: proprietary data, which it defined as assets that cannot be easily replicated by competitors; mission-critical operations with complex workflows, such as cybersecurity and enterprise resource planning; and vertical software where high-judgment use cases or human-like decision making are essential.
Conversely, BCRED warns that businesses relying on commoditized data or basic creative work are more susceptible to AI-driven displacement. “Ultimately, outcomes will be driven by fundamentals and execution, not AI headlines,” the firm stated, noting that active management is critical to navigating these shifts.
Addressing investor concerns regarding market volatility, BCRED highlighted its senior secured positioning as a primary source of downside protection. The firm reported an average loan-to-value of 37% at the time of underwriting. According to BCRED, a company’s value would need to drop by more than 60% before BCRED’s capital would be impacted.
Even accounting for a 25% decline in public software valuations, BCRED calculates that its LTV remains below 50% as of the end of 2025. The firm reported 28% EBITDA growth since investment and an interest coverage ratio of approximately two times.
It also reported approximately $3 billion of average equity cushion per deal at the time of underwriting.
BCRED cited Zendesk, one of its top five software positions as of December 2025, as a case study in how incumbency can lead to AI success. Since its 2022 acquisition, Zendesk has leveraged its market scale to grow its in-house AI annual recurring revenue from $0 to over $200 million.
Future Opportunities
Looking forward, BCRED sees the AI cycle opening new avenues for private credit, specifically in data centers and AI infrastructure. The firm remains focused on “picks-and-shovels” investments that benefit from long-term secular tailwinds rather than short-term hype.
“This environment reinforces that who you invest with matters,” BCRED concluded, citing its five-year track record of delivering high current income and disciplined underwriting through various market cycles.
BCRED recorded $3.3 billion in gross sales in the fourth quarter of 2025 and $14 billion for the full year. Net inflows for Q4 2025 reached $1.2 billion, supported by a 10% net annual return since its inception five years ago, and almost entirely comprised of current income.
As of Dec. 31, 2025, the fund’s aggregate net asset value was approximately $47.6 billion, the fair value of its investment portfolio was approximately $82.2 billion, and it had approximately $35.1 billion of debt outstanding at principal. The average debt-to-equity leverage ratio during December 2025 was approximately 0.68 times. BCRED had approximately $42 billion in committed debt capacity, with 90% in floating rate leverage, of which 71% is secured, and 10% in fixed rate leverage, of which 72% is unsecured, based on drawn amounts. The fund’s leverage sources are in the form of a corporate revolver (6%), asset-based credit facilities (41%), unsecured bonds (34%), secured short term indebtedness (2%), and collateralized loan obligation and other secured debt instruments (17%) based on drawn amounts.
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