By Patturaja Murugaboopathy and Matt Tracy
April 28 (Reuters) – Private credit fund Ares Capital Corp’s balance sheet at the end of March shows the firm does not expect much strain from the liquidity issues the industry is facing or over its exposure to the software sector.
At the end of the March quarter, during which major private credit firms faced heavy redemptions and concerns over artificial intelligence upending businesses they have lent to, Ares Capital Corp saw a slight drop in its earnings and ample funding.
But for analysts who had expected to see an adjustment in valuations, or marks as they are called, on software and other high-risk loans, there was not much to see.
Software and services comprised nearly 22% of ARCC’s loan portfolio, even though it slightly reduced that exposure in the first quarter, its filings show.
ARCC, which is a part of asset manager Ares Management, reported the fair value of its assets was $29.499 billion, versus an amortized cost of $29.648 billion.
Just a handful of software loans were marked lower than their valuation in December.
Ares Capital’s debt and equity exposure to Cornerstone OnDemand and Sunshine Software Holdings was marked at $261.9 million at March 31, 2026, about 26% below its $353.8 million cost, with the steepest discount on a $137.5 million second-lien loan marked at $103.1 million. Other exposures to Symplr Software Inc, Digicert Inc. and Corelogic Inc. were marked down.
At the same time, exposures to firms such as Global Medical Response Inc, FEH Group LLC were marked up.
INVISIBILITY
In an earnings call on Tuesday, Ares said it had hired an external consultant to evaluate its software loans.
“Overall, the independent review conducted over the past several months found that the AI-related risk across our software-oriented portfolio is relatively limited,” said Kort Schnabel, Ares Capital Corp’s chief executive officer.
That report showed about 85% of ARCC’s software portfolio represented low risk, with only a small subset of companies categorized as higher risk, he said.
“Managers are incentivized to pursue stability for the sake of stability,” said Alex Cordover, chief executive of private credit platform Tradable.
“Because valuations rely heavily on management judgment and non-public data, managers naturally benefit from this inherent information asymmetry.”
ARCC’s share price is down 6.5% this year, at $18.92. The portfolio’s net asset value, a key indicator of underlying loans’ worth in a portfolio, was $19.59 per share at the end of the first quarter, which was down from $19.94 at the end of 2025.
J.P.Morgan analyst Richard Shane said in a note the bank maintains its end 2026 price target of $19 and reiterates an overweight recommendation “given ARCC’s lengthy public track record through market cycles, flexible mandate, and position as one of the largest origination platforms in the industry”.
(Reporting by Patturaja Muruga, Matt Tracy and Vidya Ranganathan; Writing by Vidya Ranganathan; Editing by Daniel Wallis)
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