By Telis Demos

The market might eventually talk itself down from some of the worst fears about artificial-intelligence disruption of software companies. But investors shouldn't expect private-asset managers to bounce right back to where they were.

As owners of, and lenders to, software companies through their funds, the largest private-asset managers have seen their shares sink alongside swaths of the rest of the market in recent sessions. Perhaps surprisingly, though, the correction in many of these managers' shares has actually been sharper, especially when viewed across a longer time horizon.

Shares of many large private-asset managers peaked around late 2024 or early 2025, following a long surge. These include Apollo Global Management, Ares Management, Blackstone, Blue Owl Capital, KKR and TPG. Now, after recent sharp price drops, those firms' shares are each down by at least 30% since the start of 2025.

Contrast that with the moves for software stocks and publicly traded private lending funds. Over that time, the S&P Software and Service Select Industry index is down about 25%. The VanECK BDC Income ETF, which tracks business-development companies that own many private loans, is down about 21%.

This isn't how you would necessarily expect things to go. Managers of funds that raise funds to buy loans or companies make a lot of their money from fees paid by clients to manage their money, not the asset themselves.

Yes, over time those fees ultimately depend on the performance of the assets, because the managers need to keep attracting investors. Some fees are also performance-based. But that interaction takes a long time to play out. Fees can also grow through the deployment of "dry powder" funds, which can happen faster in times of market stress. And fees overall are generally far less volatile than prices of loans or companies.

With that in mind, many analysts and investors have in the past often sought to value private managers on a multiple of the steadier fee income they generate. This can strip away the effects of shorter-term moves in asset values, as well as the lumpy process of selling down past investments to harvest gains.

At the end of 2024, the group referenced above traded at an average of well over 35 times their trailing four-quarter total of fee-related earnings, figured using firm data compiled by Visible Alpha.

Now things have corrected significantly. The group is trading at an average of around 20 times on that basis, close to where it was at the end of 2022.

If individual investors sour on private assets, that slows one avenue of fee growth, at least until retirement funds start to allocate more to private assets. Or if exits of current positions don't go well, or simply take a long time, that impairs the ability to raise future funds and continue fee growth.

Consider, too, that even if prices of software companies have fallen, it might still be harder to find suitable deals in which to deploy capital in an era of generally higher interest rates and market skepticism.

According to Bain & Co.'s recent outlook for the private-equity industry, by some illustrative math, at today's lower leverage levels, and with more stagnant valuations, it might require core earnings at an acquired company to grow 10% to 12% annually to justify the investment. A decade ago, deals might have worked with just 5% earnings growth.

"It will only get harder to generate both acceptable returns and strong distributions," Bain wrote.

Other income streams for managers could also be affected by a market slowdown. That includes realizing performance revenue from past investments, through public offerings or sales. And that is before considering how firms with their own insurance units, which invest money raised through sales of products like annuities, can be directly exposed to credit performance.

The most diversified managers still have the most highly valued fee streams. Their businesses span many types of credit, equity, real estate and infrastructure, as well as different regions. Troubles for some assets, like technology credit, could be offset by steadying conditions in real estate. These firms are also themselves helping to finance the build-out of AI.

Bain & Co.'s report noted that while fundraising for buyout funds globally fell 16% in 2025, fundraising for infrastructure funds was up 58%, and up 11% for "secondaries" funds that buy private investments from other funds.

Bain described a "K-shaped" market in private equity, with "elite funds" continuing to perform well while the long tail of other funds "muddles through."

The bottom line is that the questions dogging the private-asset industry are bigger than just what is going to happen to business software.

Write to Telis Demos at Telis.Demos@wsj.com

(END) Dow Jones Newswires

February 25, 2026 05:30 ET (10:30 GMT)

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