According to remarks made by Carlyle Group LP Co-President John Redett, investors are encouraging private equity firms to reduce their allocations to the software sector and pivot towards defense companies.

Speaking during a panel discussion at the SuperReturn conference in Berlin on Wednesday, Redett stated, "The old world is the new world. What LPs want to talk about now are industrial businesses, defense, national security, supply chain resilience, and energy."

These comments come as providers of private capital navigate a challenging period following several difficult months. Their substantial bets on software companies in recent years are now raising concerns with the advent of new artificial intelligence tools.

Redett, who also serves as the Global Head of Private Equity at Carlyle Group LP, mentioned that he faced "significant criticism" a few years ago for "not participating in the software frenzy." However, he noted that this decision has resulted in the firm currently having very low exposure to that industry.

Looking ahead, Redett indicated that the U.S. defense sector will also require increased capital. He added, "Even though our military capability is very advanced, it still needs to be modernized."

The Washington-based Carlyle Group LP manages $475 billion in assets across private equity, credit, and secondary market strategies.