JPMorgan and Goldman Enable Bearish Bets on Private Credit
JPMorgan Chase & Co and Goldman Sachs Group Inc are offering hedge fund clients ways to take bearish positions on the $1.8tn private credit market, according to a report by Bloomberg citing unnamed sources familiar with the matter, as detailed in Private Equity Wire. The banks have created baskets of publicly listed companies with exposure to private credit, allowing investors to effectively bet against the sector.
Details of the Offerings
Goldman’s indexes include European financial institutions with private credit exposure, business development companies, and other alternative managers, while JPMorgan’s basket focuses on alternatives managers and business development companies. Clients can also invest directly in these indices, providing a direct mechanism for shorting the market. As is widely known, private credit has become a significant asset class in recent years, though this development highlights growing investor interest in hedging strategies.
Market Pressures and Redemptions
The private credit market has come under pressure due to a wave of redemptions, partly fuelled by investor concerns over concentrated exposure to software companies facing disruption from artificial intelligence. In the US, private credit funds have attracted significant retail inflows, and firms including BlackRock Inc, Morgan Stanley, and Cliffwater have imposed redemption limits after demand exceeded thresholds.
Previous Bank Actions
Bank of America Corp had previously offered a similar basket of European firms, including Partners Group Holding AG, Deutsche Bank AG, and Axa SA, but has since withdrawn the recommendation, according to reports cited in the same source.
