Oaktree Capital Limits Software and Direct Lending Exposure Amid Private Credit Growth

Oaktree Capital Management has informed its clients that its exposure to software companies and direct lending is limited. This assurance comes as global private credit funds begin to retreat from sectors identified as having heightened risk.

The firm’s cautious positioning is part of a broader shift in how private credit managers are approaching high-risk assets, particularly within the technology sector.

Asset Allocation and Risk Management

On April 9, 2026, details emerged regarding the specific constraints Oaktree has placed on its portfolio. Howard Marks has limited the firm’s direct lending to less than 15% of its total assets.

As part of this risk-mitigation strategy, Oaktree has also reduced its exposure to software debt. This targeted reduction aligns with the firm’s effort to minimize vulnerability in areas where credit risks are perceived to be increasing.

Market Context and Investor Exodus

The move by Oaktree follows a period of instability in the private credit market. On March 28, 2026, reports indicated a sudden investor exodus from the private credit sector.

A significant portion of the redemption requests affecting these funds are concentrated in direct lending. Direct lending is a subset of private credit where investment firms provide loans directly to companies, bypassing traditional banking intermediaries.

The retreat of global private credit funds from these areas suggests a tightening of available capital for companies that have relied on direct lending for funding, particularly software firms that are now viewed as higher-risk investments by some credit managers.