April 21 (Reuters) - Wall Street's largest alternative asset managers face a critical test in the coming weeks as they try to convince investors that concerns over AI disruption to their portfolio companies and a pullback in retail private credit demand are overblown.

Managers of alternative assets - a broad class of securities outside traditional stock and bond markets, including private equity, private credit and real estate - have seen their shares pressured for months by fears of slower growth due to potential disruption from artificial intelligence to their portfolio companies.

Pressure in private credit has been a drag on inflows, and analysts and industry experts expect it to linger through the year.

Total fundraising for private credit was nearly flat at $49.9 billion in the first quarter versus the preceding quarter, according to data from With Intelligence, a unit of ratings giant S&P Global.

Direct lending fundraising, the segment within private credit facing the most scrutiny, fell to $10.7 billion in the first quarter, its lowest quarterly level in three years, the data showed.

"We don't expect the first-quarter prints to be anywhere near as good as what the banks just reported," Evercore ISI analyst Glenn Schorr said this week, citing slower fundraising, uneven dealmaking opportunities and retail investors running for the exits.

The brokerage said that alternative asset managers have been beaten down on direct lending concerns, rising retail redemptions and a steady drum beat of negative press over the past few months.

INVESTOR EXODUS

Ahead of quarterly earnings from the group, starting with Blackstone on April 23, Oppenheimer analysts said they were cutting price targets for several firms, "grudgingly as recognition of the change in investor perceptions".

In a note that examined Ares Management ( ARES ), KKR and Blue Owl Capital, the analysts flagged a central issue this year - efforts by wealthy individuals to pull money from funds that provide access to illiquid private loans, once largely the domain of pension funds.

Many firms have pushed hard into retail fundraising, drumming up capital from wealthy people that in the case of Blackstone now accounts for about 24% of total assets and for Blue Owl is around 40%.

"Redemptions from retail funds in recent months call into question the trajectory of the retail growth story for these stocks," Oppenheimer analysts wrote, although they argue that "the retail markets will ultimately be a very large opportunity for much of the group."

Managers earn fees on the money in those funds, so could miss out on potential profits if they shrink.

"The key difference today is that current pressures are structural rather than transitory, as the causes behind current market stress are unlikely to resolve within a few quarters," Francesca Ricciardi, private credit expert at Debtwire Europe, told Reuters.

Managers have underscored the resilience of their portfolios, saying credit quality remains stable and investor fears are driven by media coverage rather than fundamentals.

PRIVATE EQUITY EXITS PRESSURED Many of the largest alternative asset managers built their franchises around private equity - buying companies, driving efficiency gains and exiting them years later at a profit.

Investors will be focused on progress in that segment, which has been constrained in recent years by higher interest rates that have left sellers unwilling to accept lower valuations.

Debtwire's Ricciardi said that while investors initially reacted to media headline-driven developments such as the software selloff, that has since given way to a "broader, more structural reassessment of the private credit model itself, particularly around liquidity expectations and valuation credibility."

Expectations were high entering 2026 that private equity firms would finally be able to exit a backlog of about 29,000 companies, but the U.S.-Israel conflict with Iran has rattled markets.

Meanwhile, scrutiny has intensified on their sizable bets on software companies amid concerns over AI-driven disruption.

(Reporting by Isla Binnie in New York, Manya Saini and Arasu Kannagi Basil in Bengaluru; Editing by Sweta Singh and Anil D'Silva)