Goldman Sachs Group Inc. and JPMorgan Chase & Co. are among investment banks offering hedge fund clients ways to bet against the $1.8 trillion private credit market, people with knowledge of the matter said.

The firms have assembled baskets of listed companies with exposure to the space, the people said, who requested not to be identified discussing bespoke product offerings.

Goldman’s indexes vary from one focused on European financial institutions with private credit exposure to a group of business development companies and another alternatives managers more broadly. JPMorgan’s basket meanwhile includes alternatives managers and BDCs, the people said. Clients can also invest in the indices.

Bank of America Corp. had a basket of European financial firms with exposure to private credit, including Partners Group Holding AG, Deutsche Bank AG and Axa SA. The Financial Times reported Thursday that the bank had since withdrawn a recommendation that clients bet against European companies potentially exposed to private credit shocks.

Representatives for the lenders declined to comment.

The private credit market is facing pressure from a wave of investor redemptions, driven in part by concerns that lenders may be too heavily exposed to software companies — a sector undergoing rapid disruption from advances in artificial intelligence.

Much of the turbulence is centered in the US, where private credit funds have attracted tens of billions of dollars from retail investors. Firms including BlackRock Inc., Morgan Stanley and Cliffwater have recently imposed limits on withdrawals after redemption requests exceeded allowable thresholds.

Pimco president Christian Stracke warned on Wednesday that 20% to 30% exposure to single industries like software is prompting investors to “not wait around to see how bad it gets.”

Written by: Silas Brown and Nishant Kumar — With assistance from Katherine Doherty @Bloomberg

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