Ares Management Corp.'s $29 billion flagship private credit fund reported an increase in troubled investments in the second quarter, as the industry continues to grapple with exposure to businesses vulnerable to advances in artificial intelligence.

The rise in non-accruals at Ares Management Corp.'s flagship vehicle underscores growing concerns across the private credit market about the durability of certain borrowers facing technological disruption. Industry observers note that funds with heavy concentrations in sectors susceptible to AI-driven obsolescence are seeing early warning signs in portfolio quality metrics.

While the absolute level of non-accruals remains manageable relative to the fund's total assets, the upward trajectory has prompted tighter underwriting standards and enhanced monitoring of credits in software, business services, and other AI-exposed verticals. Market participants are watching closely to see if this trend broadens across other large direct lending platforms.

The development comes as private credit funds overall manage record asset levels, with Ares Management Corp. among the largest players. Regulators and investors alike are scrutinizing portfolio resilience amid higher-for-longer interest rates and accelerating technological change.