Key Moments
- Apollo Global Management Inc. has introduced a risk framework that categorizes software into 12 to 14 segments based on exposure to AI-driven disruption.
- The firm has applied this framework not only to new deals but also across its existing portfolio to identify areas where it may seek to reduce risk.
- Other major asset managers, including Ares Management Corp., Blackstone Inc., and Blue Owl Capital Inc., have also conducted AI-related reviews of software-focused investments.
Apollo Builds Structured AI Risk Framework for Software Deals
Apollo Global Management Inc. is evaluating every prospective software investment through the lens of potential artificial intelligence disruption, as the asset manager responds to investor unease about technology advances rendering business models obsolete.
Rob Bittencourt, head of thematic investing at Apollo, said the firm introduced a dedicated risk assessment framework last year to systematize this process. The framework segments software into 12 to 14 distinct categories and assigns rankings based on how susceptible each category is to disruption from AI.
“We also went through our existing portfolio and overlaid that framework on top of our existing portfolio last year to determine where we might want to move on and minimize our risk,” Bittencourt said on a Bloomberg Intelligence podcast released Thursday.
Broader Asset Management Industry Responds to AI Concerns
Apollo’s methodology aligns with a wider shift across the asset management industry as firms attempt to quantify and curb AI-related risks within their portfolios. Heightened investor concern about concentrated exposure to software assets has weighed on share prices and contributed to outflows from the $1.8 trillion private credit market.
As part of these efforts, Ares Management Corp. engaged an external consultant in April to evaluate software-heavy positions in its largest publicly listed private credit fund. Blackstone Inc. and Blue Owl Capital Inc. have carried out their own internal reviews of software-oriented holdings.
Where AI Threats – and Defenses – Are Emerging
Bittencourt characterized recent progress in AI as “probably the most profound platform shift that the industry has ever faced.” In his view, companies whose workflows can be readily handled by AI are the most exposed, with data visualization cited as one area where automation risk is particularly high.
Conversely, Apollo sees certain businesses as relatively shielded from immediate AI disruption. Bittencourt pointed to healthcare as an example, noting that stringent regulation slows the adoption of AI in that sector and can provide a buffer for incumbent operators.
| Aspect | Details |
|---|---|
| New framework focus | Ranks 12 to 14 software categories by vulnerability to AI disruption |
| Application | Used for both new software investments and review of existing portfolio |
| High-risk example | Businesses with workflows that AI can easily manage, such as data visualization |
| Lower-risk example | Healthcare, where regulation slows AI adoption |
| Industry context | Investor concerns have pressured software-heavy exposures and the $1.8 trillion private credit industry |
Assessing Managers’ Strategic Response to AI
Beyond classification of business models, Apollo is also scrutinizing how management teams respond to rapid changes in AI capabilities.
“Are they acting and articulating a strategic vision that has enough urgency that reflects the pace of change that’s occurring in the underlying technology?” Bittencourt asked.
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