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Investors boost bearish bets on private credit amid bond sell-off
A 14-ETF sample tracked via FINRA data showed net shorts of $88.6 million in early September, up from $44.0 million in August, with short interest reaching 3.4% in March before easing to 2.1%.
Hedge funds and other investors are increasing bearish positioning in private credit as a prolonged sell-off in global bonds has raised questions about the resilience of the roughly $1.8 trillion market, according to a report by Bloomberg.
Because private credit assets are not easily shorted directly, traders are instead using listed vehicles and proxies, including business development companies, collateralised loan obligations, and alternative asset managers with exposure to the sector, the report said.
Data cited from EPFR, using FINRA data, showed net short selling across a 14-ETF sample reached $88.6 million during the first half of September, about double Augusts $44.0 million and near $102 million in March when investors exited private credit positions more aggressively.
The report also said the number of shares sold short climbed to 6.4 million by mid-September from 2.9 million at the end of August, and that short interest as a proportion of assets under management rose to a record 3.4% in March before easing to 2.1%.