Mathew Cestar (pictured), president of $20 billion Arini, talks to Alternative Credit Investor about the impact of the so-called “SaaSpocalypse” on personal credit and why Europe hasn’t emerged unscathed.
Concentrated private credit exposure to software companies “is a problem not just in the U.S. but also in Europe,” says Mathew Cestar, president of alternative asset manager Arini.
Earlier this year, the so-called “SaaSpocalypse” rocked markets after artificial intelligence (AI) developer Anthropic unveiled tools that raised questions about the future of the software. Due to lenders and funds’ heavy exposure to software companies, the fallout spread to retail loans and triggered sell-offs in U.S.-listed financial instruments, including those managed by Apollo, Ares, KKR and TPG.
A trend that is still affecting some business development companies at the time of writing, almost five months later.
In recent months, many in the industry have argued that the software concentration problem is primarily a US private market problem, while Europe is less at risk because software and technology make up a smaller share of economic activity than in the US.
Sit down with Alternative credit investor, Cestar agrees that the U.S. personal loan market is overly dependent on this sector, with software or software-related loans accounting for 30 to 50 percent of the market.
However, he points out that even if the European economy is driven by fundamentally different factors than that of the United States, that does not mean that the private lending market on the continent is not also heavily dependent on software.
On the contrary: European lenders saw the success of the strategy and wanted a share in it.
“The European economy is driven by fundamentally different factors, with software accounting for a smaller share of economic activity than the US,” explains Cestar ACI. “Despite this, many private credit managers in Europe are still significantly overweight in software due to the perceived attractive credit characteristics of software.
“So it’s not just a US problem, it’s also a problem in Europe.”
After the global financial crisis, U.S. regulators barred banks from lending at high levels of leverage, pushing much software-related financing out of the hands of traditional banks and into private credit markets, helping to spur the sector’s growth amid high valuations, Cestar explains.
Overall, this made the software space “one of the most successful strategies in private equity… and credit is the second derivative of that.” “That’s why the representation of software in private markets has increased so quickly.”
For Arini, which manages assets worth £20.03 billion (£15.1 billion), Cestar says the alternative manager has steered clear of software companies.
“Our view is that if one sector represents 30 to 50 percent of your exposure, there is too much concentration,” he says. “The price of these loans was also perfect as they were considered the least risky.”
Even if the future of software isn’t threatened by AI disruption, this heavy focus on software and its pricing is likely to catch up with the industry at some point, Cestar argues.
“What’s happened recently is the concerns about AI, but it could have been anything really if you allow for the price of perfection,” he says.
Looking ahead, Cestar explains that it is still too early to tell what impact AI will have on software companies, as the industry is still “figuring out which business models will stick.”
However, recent events marked a turning point. Cestar explains that for a while you really couldn’t differentiate between the managers. They all gave loans at the same interest rates and with the same leverage.
What you’ll see now is real differentiation between managers, both in the US and Europe, he says. Those who did solid credit work and those who didn’t and were too focused on the industry.
“On the negative side, it is a shakeout; on the positive side, it is a real catalyst for the further institutionalization of this market.”
Arini’s investment focus is on middle-market financing, which Cestar says is an area that “does not correlate with some of the risk profiles in institutional portfolios.”
“Many institutional investors are involved in private equity and are increasingly investing in the credit market, but a large part of this is more large-cap and sponsor-driven,” he explains.
“Most players in Europe tend to be generalists and this market does not reward generalist skills.”
https://alternativecreditinvestor.com/2026/07/09/arinis-cestar-europe-faces-its-own-software-reckoning/
