Goldman Sachs Group Inc. and JPMorgan Chase & Co. have put together lists of publicly traded firms whose businesses are linked to the $1.8 trillion private credit market, according to people with knowledge of the matter. The offerings are being presented to hedge fund clients as mechanisms to express downside views on that market.
The banks have assembled baskets comprised of listed companies that carry exposure to private credit activity. Those involved in structuring the products said the compositions were tailored to reflect different slices of the market and that clients have the option to invest directly in the indices.
Goldman’s range of indexes is reported to include one concentrated on European financial institutions with private credit exposure, alongside a grouping of business development companies - often abbreviated as BDCs - and a broader set of alternatives managers. JPMorgan’s basket reportedly contains both alternatives managers and BDCs as well.
People who described the bespoke constructs requested anonymity when discussing the offerings. That request reflects the private, client-specific nature of the products and the sensitivity surrounding bespoke index strategies.
The effort by the two large banks comes at a time when the private credit market is under strain. Market participants have seen a wave of investor redemptions, a dynamic that is pressuring the space. One contributing concern cited by the people was that lenders into the private credit market may carry outsized exposure to software companies - a sector currently experiencing rapid disruption driven by advances in artificial intelligence.
Those dynamics have prompted institutional investors and their advisers to consider tools for hedging or shorting exposure to parts of the private credit ecosystem. The bank-assembled baskets of listed companies provide one such avenue, allowing hedge funds to gain direct market exposure via public securities rather than through private loan holdings.
Details beyond the high-level compositions of the baskets - including precise weightings, trading mechanics and distribution - were not specified by the people commenting on the arrangements.