Wall Street banks including JPMorgan Chase and Barclays have unveiled a fresh crop of hedges against high-flying private credit funds, creating a new market for credit default swaps against flagship vehicles run by Blackstone, Apollo and Ares. The contracts began trading last week after S&P Global launched the CDX Financials index, allowing traders to wager on whether individual vehicles will default.

The Blackstone Private Credit Fund, the industry's largest with $83bn of investments, is among the vehicles now tradable. Recent pricing for Bcred contracts showed a $790,000 premium and $100,000 annual coupons to protect $10mn of debt over five years, according to Bloomberg data.

The new derivatives reflect a leaner era for the $22tn private markets sector. Private credit has had a rough year as AI advances sparked concerns over significant lending to software companies. Large private credit groups faced surging redemption requests from wealthy investors in the first quarter. Some traders are simply betting on the sector's decline, while others arbitrage pricing differences between fund bonds and CDS spreads.