According to informed sources, investment banks including Goldman Sachs and JPMorgan Chase are providing hedge fund clients with avenues to short the $1.8 trillion private credit market. The sources indicated that these firms have assembled a series of portfolios involving publicly traded companies with exposure to the sector. The individuals requested anonymity due to discussions concerning bespoke financial products.

Goldman Sachs's index offerings are distinct, featuring one index focused on European financial institutions with private credit exposure, a portfolio covering Business Development Companies (BDCs), and a broader basket of alternative asset managers. Sources stated that JPMorgan Chase's basket includes alternative asset managers and BDCs. Additionally, clients have the option to invest directly in these indices.

Bank of America previously launched a basket comprising European financial firms with private credit exposure, including Partners Group Holding AG, Deutsche Bank, and Axa. However, the Financial Times reported on Thursday that the bank has retracted its recommendation for clients to short European companies potentially impacted by stresses in the private credit market.

Representatives for the lending institutions declined to comment.