Weekly Market Summary

Extra Credit^*

• Direct lending funds are pulling back from the software sector, creating opportunities for more opportunistic lenders to step in with stricter terms. Loans based on annual recurring revenue, commonly used to finance high-growth, unprofitable SaaS companies, have become far less common. Where deals are still being completed, they are increasingly led by higher-risk lenders demanding materially higher returns.
• In early February, concerns about the impact of artificial intelligence on SaaS business models, a key borrower group for direct lending funds, triggered a sharp sell-off in public software equities and pushed many syndicated loans to private software companies into distressed territory. SaaS valuations are largely anchored in recurring subscription revenue, but the rise of lower-cost AI tools is raising questions about the durability of those revenue streams. These sector-specific pressures, alongside a broader risk-off backdrop, have weighed on refinancing and repricing activity, leaving overall leveraged loan volumes running 32% below last year’s pace through the end of March, according to PitchBook LCD.
• The Department of Labor released a proposed rule on March 30 outlining how fiduciaries should evaluate alternative investments within defined contribution plans. The proposal follows an August 2025 executive order that reversed prior guidance discouraging such allocations, which had been based on concerns about plan sponsors’ ability to properly assess more complex and potentially riskier assets. While much of the attention has centered on private markets, the proposal also explicitly includes assets such as cryptocurrency, infrastructure, and commodities. It does not prohibit any investment category as long as it is otherwise legal, making the framework broadly applicable.

Reuters and Pitchbook as of 4/8/2026.