Two of the biggest CLO managers are quietly de-risking their software exposure, and the numbers suggest they're not alone.
The biggest names in collateralized loan obligations are doing something that would have seemed unthinkable two years ago: treating software companies like risky bets. Blackstone and Guggenheim, both heavyweight CLO managers, are actively trimming their software sector exposure in new deals, driven by a straightforward concern that artificial intelligence is about to upend the business models of companies they’ve been lending to for years.
This isn’t a subtle portfolio tweak. Software and services make up roughly 15% of collateral in US syndicated CLOs, with software loans alone accounting for about 12%. In dollar terms, that’s approximately $235 billion in software loans sitting inside CLO portfolios, representing around 16% of the $1.5 trillion leveraged loan index.
The AI traffic light system #
Blackstone’s approach to the problem has been characteristically systematic. President Jon Gray has pointed to what the firm calls an AI risk “traffic light” system, a framework that requires AI risk analysis in every investment decision and builds in readiness for faster exits on vulnerable assets.
Guggenheim’s perspective is blunter. Rob Zable, who heads the firm’s CLO operation, has said that most managers are simply not equipped to handle the speed at which AI is reshaping the software landscape.
The de-risking started showing up in concrete ways before the broader market caught on. Multiple CLO managers began reducing software exposure ahead of a March 17, 2026 report, implementing secondary sales and becoming far more selective about which software loans they’d take in primary markets.
What the secondary market is telling us #
The pricing data paints a clear picture of where sentiment has landed. Sales of certain software-related loans and bonds were executed at 89 to 98 cents on the dollar in February and March 2026, down from earlier periods when these same instruments were trading at premiums.
The broader supply picture adds another layer of pressure. Global CLO loan supply is projected to decrease by approximately 25% in 2026, dropping to around $150 billion according to JPMorgan estimates.
What this means for investors #
The firms that are moving first, like Blackstone and Guggenheim, are shifting toward company-by-company assessments of business model resilience. Zable’s comment about most managers being unprepared suggests the industry’s analytical infrastructure hasn’t caught up to the new reality.
Firms that develop credible AI risk assessment frameworks early, like Blackstone’s traffic light system, could gain an edge in marketing new CLO deals to institutional investors. Companies that need to refinance software-sector debt may find the terms less favorable than they were even six months ago, particularly if their AI vulnerability profile is unclear.
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