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1Scan for outdated or missing drivers - takes under a minute2Repair Windows errors before they cause bigger problems3Fix the driver behind crashes, sound loss and screen glitchesBefore investing, find out exactly where the fund’s AI exposure sits, how the relevant borrowers or projects are expected to repay, what leverage and protections apply, how loans are valued, and when you can actually withdraw. AI exposure can mean lending to software companies whose businesses may face AI-driven competition, or financing infrastructure such as data centers and power projects. Those are different risks and require different evidence. Sector-wide figures can help frame questions, but they cannot establish the holdings, terms, or suitability of a particular fund.
What does “AI exposure” mean in this fund?
Start by separating two kinds of exposure rather than relying on a single label. A fund may hold loans to a company that sells software, to a company developing AI products, or to a business whose customers could replace its services with AI tools. It may instead finance data centers, power capacity, or related projects whose repayment depends on leases, guarantees, or project cash flows. A position can also have indirect exposure through a special-purpose vehicle (SPV), asset-backed security, fund-of-funds, or co-lending arrangement.
| Exposure type | What may drive repayment | Key issue to investigate |
|---|---|---|
| Software or SaaS borrower | The company’s operating cash flow and ability to service debt | Whether AI changes its products’ value, customer demand, pricing power, or ability to retain and win customers |
| AI-related infrastructure | Project or asset cash flows, including payments under leases or guarantees | Whether facilities are built and operational, capacity and power are available, and legally obligated counterparties can pay |
Ask for exposure by borrower, industry, geography, instrument, and financing structure. Request the amount and share of the fund associated with software and SaaS, AI-product companies, businesses vulnerable to AI substitution, and AI-linked infrastructure. Find out whether the manager classifies exposure by a borrower’s primary business, by revenue source, or by an indirect connection; those methods can produce different totals.
Where disclosures permit, trace indirect holdings to the underlying borrower, project, collateral, and ultimate payer. Check whether apparently separate positions depend on the same technology customers, tenants, power providers, or other counterparties. The Bank for International Settlements (BIS) has reported that several large business development companies (BDCs) share borrower pools, making common borrower exposure a concentration worth checking. BDC data describes only part of the market and is not a substitute for the private fund’s own portfolio disclosure.
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How much of the market is exposed—and what can those figures tell you?
BIS’s July 2026 bulletin reports approximately $115 billion in BDC loans to software firms, around one-fifth of BDC lending. Its analysis also says loans to software-as-a-service (SaaS) companies grew from almost $8 billion in 2015 to over $500 billion, or 19% of total direct loans, by the end of 2025, and that a third of private credit funds had extended loans to SaaS firms. These figures use different measures and market scopes: they are context for asking a manager better questions, not an estimate of any one fund’s exposure or loss risk.
For software loans examined in its July 2026 summary, BIS said uncertainty about generative-AI revenue had not yet affected those loans. That observation describes the loans examined at that time; it does not show that future disruption is absent or that a particular borrower is resilient.
Can the borrowers or projects repay under pressure?
For software and SaaS borrowers
Ask the manager to explain how each material borrower earns revenue and what would make customers stay. Useful information includes recurring versus usage-based revenue, customer concentration, contract duration, renewal and churn patterns, pricing, and the cost and difficulty of switching to another provider or building an alternative. Ask whether the borrower has maintained revenue and cash flow as AI tools and customer choices have changed, and what evidence supports the manager’s view of its competitive position.
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Request the manager’s base and downside cases, including the assumptions for revenue, margins, interest expense, and refinancing. Ask how much cash the borrower generates to service debt, what covenant headroom remains, and which assumptions would cause a breach or missed payment. A forecast is more informative when you can see its assumptions and the consequences of a weaker case than when you receive only a broad assurance that the borrower is “AI-proof.”
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Establish whether each project is operational, under construction, or still dependent on development milestones. Ask whether required power and capacity are available, who must deliver them, and what must happen before a tenant or other payer is legally required to pay. Review lease duration, termination and renewal rights, payment conditions, and the identity and creditworthiness of each counterparty. For a guarantee, establish who provides it, what obligations it covers, and whether the guarantor could meet them when needed.
Construction delays, incomplete capacity, or refinancing needs can affect repayment even when demand for AI infrastructure is strong. In its July 2026 Financial Stability Report, the Bank of England warned that off-balance-sheet and bespoke financing can make it harder to locate risk. It also stated: “The riskiness of this debt depends on the underwriting terms, in particular the quality of the leases and guarantees which back debt holders’ claims.” The practical question is not just whether a project is associated with AI, but which party is legally obligated to pay and on what conditions.
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Where does the debt sit, and how much leverage supports it?
For each material exposure, identify the legal borrower, the fund’s instrument, and the borrower or project’s other financing. Ask for the debt’s seniority, security, collateral, covenants, maturity, and any structural subordination—that is, whether another entity’s creditors have priority over assets or cash flows the fund ultimately relies on.
Trace borrowings at both the underlying borrower or project level and the fund level. A fund’s own financing can amplify changes in portfolio values or cash flows, while leverage inside an SPV or asset-backed structure may add another layer. Ask who can enforce the security, what assets it covers, and how cash moves through the structure before it reaches the fund. Do not count multiple securities linked to one project or counterparty as independent diversification without checking whether they share the same repayment source or failure point.
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How are loans valued, and how quickly will you hear about trouble?
Ask who assigns loan values, how often values are reviewed, which valuation methods are used, and what borrower information the process relies on. Find out who challenges the marks independently, how conflicts are managed, and what events—such as missed payments, covenant pressure, a material amendment, or a change in the borrower’s outlook—trigger an interim review.
Ask how the manager compares a valuation with borrower results, defaults or amendments, relevant public comparables, and observable transaction evidence. Also ask how soon investors receive material portfolio updates and what those updates include. BIS notes that BDC net asset values are largely determined by the book values of illiquid private loans. That is a market-level observation, not evidence that a specific fund’s marks are wrong; the fund’s own valuation policy and supporting information matter.
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First identify the legal vehicle. A closed-end drawdown fund, publicly traded BDC, perpetual-life BDC, interval fund, and other structures can have different investor exit rights. Do not infer that an investment is readily redeemable from a description such as “quarterly liquidity.” Read the governing documents for the actual terms.
- Lockup and redemption schedule: When does eligibility begin, and how often can investors submit requests?
- Notice and settlement: How far in advance must a request be made, and when would an accepted request be paid?
- Caps and gates: Can the fund limit the amount accepted in a period, prorate requests, or carry unfilled requests forward?
- Suspension and discretion: In what circumstances can the manager pause or defer redemptions, and who makes that decision?
- Form of payment: Can the fund distribute assets in kind rather than cash?
The Federal Reserve’s May 2026 report says many perpetual-life BDCs disclosed an intention to cap redemptions at 5% of net asset value per quarter. It describes interval funds as typically offering periodic redemptions and being required to accept at least 5% of redemption requests. These are descriptions of vehicle-level practices and requirements, not a promise that a particular fund will accept every request or pay you in full when you want to exit. Verify the specific fund’s documents and the consequences of an oversubscribed redemption period.
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What should you verify in the offering documents and terms?
Read the offering memorandum and the fund’s limited partnership or shareholder documents alongside its fee schedule, conflicts disclosures, valuation policy, and redemption provisions. Check that descriptions in marketing materials match the legal documents, and note which terms the manager may change or interpret at its discretion. Confirm the fund’s offering structure and the investor eligibility rules that apply in your jurisdiction.
For a U.S. Regulation D offering, the Securities and Exchange Commission (SEC) explains that an issuer must meet applicable accredited-investor verification standards. Its guidance states: “Self-certification by the investor alone (by checking a box) without the company having any other knowledge of the investor’s financial circumstances or sophistication is not sufficient to meet either the ‘reasonable belief’ standard or the ‘reasonable steps to verify’ requirement.” This U.S.-specific guidance does not determine the rules that apply in other countries.
How should you compare funds you could actually invest in?
Compare current documents on like-for-like terms rather than ranking funds from broad sector statistics or marketing labels. A useful comparison includes:
- Strategy and type of AI exposure, including indirect holdings where disclosed.
- Borrower, industry, geography, and counterparty concentration.
- Borrower cash-flow resilience or infrastructure contract and counterparty quality.
- Debt seniority, collateral, covenants, maturity, and leverage at borrower and fund level.
- Valuation process, independent challenge, and investor reporting frequency.
- Fees, conflicts, and the actual redemption or transfer rights in the governing documents.
Use the same period and definitions when comparing reported exposures, and distinguish a fund’s current holdings from its ability to invest in a sector later. If a manager cannot explain how an exposure figure was calculated, what supports a repayment assumption, or how an investor’s exit request would be handled, those are unresolved diligence questions—not details that market-wide statistics can answer.
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