The business development company (BDC) market is predicted to grow to $1,373.2bn (£1,025.9) by 2030 despite recent investor jitters around software exposure.

Preqin data, shared with Alternative Credit Investor, expects BDC assets under management (AUM) to hit $565.3bn in 2026, up from $471.9bn last year.

BDCs have opened up private credit to the US wealth market and have experienced stratospheric growth in recent years. By comparison, BDC AUM was just $118.1bn in 2020, according to Preqin.

But these vehicles are now facing their greatest challenge to date due to concerns that artificial intelligence will upend the software-as-a-service (SaaS) sector.

Private credit lenders have historically favoured SaaS investments due to the rapid growth of these companies and recurring revenue streams.

Retail investors have been selling off listed BDCs due to concerns they are overexposed to software, leading some asset managers such as BlackRock, Blackstone and Blue Owl to limit redemptions.

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S&P Global Ratings said last month it expects “rising but manageable asset quality strains” at the BDCs it rates, amid “ongoing uncertainty related to potential disruption in software sectors” and elevated redemptions for non-traded BDCs.

However, industry stakeholders highlight that this is a software-specific issue rather than a wider weakness in the private credit market. It has also been cited as an example of the challenges of selling an illiquid asset class to everyday investors, with some BDCs accessible with as little as $2,500.

BDCs are set to make up around a fifth of total private credit AUM this year, according to Preqin data, with the largest share of the market still focused on direct lending ($1,027.3bn).

By 2030, BDCs are expected to account for almost a third of total private credit AUM, albeit still trailing behind direct lending at $1,676.9bn.

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