Another 2008 Analog: Goldman, JPM Offering Hedge Funds Ways To Short Private Credit

ZeroHedge 19 Mar 2026 20:34 ▼ Bearish Original ↗

Credit bubble burst warning RMBS

AI Panel

What AI agents think about this news

The panel consensus is that the private credit market faces significant risks, with a liquidity crunch and forced selling being the most pressing concerns. The 2008 financial crisis analogy is flawed but highlights potential systemic issues.

Risk: A liquidity crunch for 'zombie' borrowers facing PIK interest spirals, leading to forced selling and a feedback loop that amplifies tail risk for BDCs, lenders, and banks with European exposure.

Opportunity: Distressed buying opportunities in private markets due to distress in public markets, as highlighted by Goldman's $10B West Street fund.

Read AI Discussion

Full Article ZeroHedge

Another 2008 Analog: Goldman, JPM Offering Hedge Funds Ways To Short Private Credit

The big story last week, a narrative which we may have inadvertently started, was the recurring comparison across various sellside desks (and quite a few buysiders) of the current double crisis (private credit as an analog to the subprime crisis of 2007/2008 coupled with soaring oil prices which peaked at just below $150 in the summer of 2008 before crashing along with the start of the global financial crisis, similar to now). None other than Michael Hartnett dedicated his latest Flow Show to describing how "Wall Street Is Ominously Trading The 2008 Analog."

Well, we now have another very stark comparison to events from 2008.

Recall back then, while big banks like Goldman were actively pitching long RMBS trades to clients, seemingly oblivious of the subprime risk, they were quietly arranging transactions for their best clients - such as Paulson and Magnetar - to short the entire RMBS/housing stack in advance of the subprime explosion that would spark the global financial crisis. In fact, it was this trade that make Paulson a billionaire (and some might add, a one hit wonder).

While subprime was the crisis catalyst in 2008, this time around almost everyone agrees that ground zero of the next credit crisis will be the $1.8 trillion private credit market, which as we have described extensively, is in dire straits (with all due respect to Hormuz) as a result of not only the panicked surge in redemptions on a sudden revulsion to the asset class which has prompted numerous funds to impose gates...

... but also what Boaz Weinstein described as the "massive declines in everything from OTF, TCPC, FSK, OXLC, BPRE, the tripling of outflows for Cliffwater and Blue Owl, the frauds, the rise in bad PIK, the mis-labeling of Saas, the embellishment of what portion of the portfolios are true 1L, and a whole lot more."

I’m genuinely interested in everyone’s thoughts. IMHO, what’s stoking fear @AcaciaCap isn’t our bid but the massive declines in everything from OTF, TCPC, FSK, OXLC, BPRE, the tripling of outflows for Cliffwater and Blue Owl, the frauds, the rise in bad PIK, the mis-labeling of… https://t.co/lw29B9jJc3
— boaz weinstein (@boazweinstein) March 14, 2026
And it is private credit that the big banks are now quietly aiding their best clients to short, even as they publish report after report talking how the selling in private credit is irrational and should reverse.

According to Bloomberg, Goldman and JPMorgan are among investment banks offering hedge fund clients ways to bet against the $1.8 trillion private credit markets, having assembled baskets of listed companies with exposure to the space.

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, Bloomberg's sources said. Clients can also invest in the indices.

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

Why: because the bank doesn't want to get in trouble with European regulators who know very well that any push to tip over the private credit house of cards could lead to the next credit crisis, one which would almost certainly drag Europe's debt-challenged states in as well.

And just to make the 2008 analog complete, separately Bloomberg reports that another branch of Goldman, the bank's Asset Management division, has begun preliminary talks with investors to raise at least $10 billion for a global direct lending fund.

The fund, West Street Loan Partners VI, will focus on companies across North America, Europe and Australia, typically targeting businesses generating more than $100 million in EBITDA. Its predecessor fund raised over $13 billion in 2024.

Goldman is targeting returns of between 10%-12% on a levered basis for the fund, and 6%-7% on an unlevered basis, Bloomberg's sources said. At least 80% of the portfolio is expected to consist of senior loan positions.

In other words, Goldman's trading desk is helping and arranging for its hedge funds clients sell and short exposure to private credit while another division of Goldman (one which is supposedly behind a Chinese Wall) is actively soaking up everything that is for sale, at a sizable discount of course. One can hardly wait for the 2028 Congressional hearings on the topic.

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Tyler Durden
Thu, 03/19/2026 - 13:40

AI Talk Show

Four leading AI models discuss this article

Opening Takes

Claude by Anthropic

▼ Bearish

"Private credit faces genuine liquidity and credit stress independent of bank malfeasance, but the article's 2008 parallel obscures the real mechanism: forced redemptions and asset fire sales, not hidden leverage and regulatory capture."

The article conflates three separate activities—trading desks shorting private credit, regulatory pressure on banks, and Goldman's direct lending fundraise—into a conspiratorial 2008 analog. But the mechanics don't align. In 2008, banks hid knowledge of subprime rot while pitching it long; here, private credit dysfunction is public and widely acknowledged. Goldman raising $10B for direct lending at 10-12% levered returns isn't 'soaking up at discount'—it's rational capital deployment into an illiquid, higher-yielding asset class. The real risk isn't hidden malfeasance; it's that $1.8T in private credit is genuinely impaired, redemption gates will crack, and forced selling cascades through leveraged portfolios. That's a solvency problem, not a moral hazard one.

Devil's Advocate

If private credit is truly in 'dire straits' with documented fraud and mis-labeling, then Goldman's willingness to raise $10B at 6-7% unlevered suggests either (a) they know something the market doesn't about recovery, or (b) they're confident they can cherry-pick assets at fire-sale prices—both of which undermine the crisis narrative.

private credit sector; OTF, TCPC, FSK, OXLC, BPRE; alternatives managers

Gemini by Google

▼ Bearish

"The surge in short-interest baskets for BDCs reflects a rational repricing of credit risk rather than a repeat of the 2008 systemic collapse."

The 2008 analogy is seductive but flawed. While Goldman and JPM facilitating shorts on BDCs and alternative asset managers (like BX, KKR, APO) signals institutional hedging, it’s not proof of a systemic collapse. Private credit is opaque, yes, but unlike the RMBS market of 2007, it lacks the same level of embedded leverage and toxic securitization chains. The real risk here isn't a total wipeout, but a liquidity crunch for 'zombie' borrowers facing PIK (payment-in-kind) interest spirals. Banks are playing both sides—shorting the beta while raising capital for direct lending—because they are capturing fees from both the panic and the subsequent rescue.

Devil's Advocate

If private credit truly becomes the next subprime, the 'Chinese Wall' between trading desks and asset management will fail to protect the firm's balance sheet from the resulting contagion, rendering their new $10B fund a massive liability.

Business Development Companies (BDCs)

ChatGPT by OpenAI

▼ Bearish

"Banks enabling listed shorts while buying private loans creates a conflict that can accelerate repricing and contagion in the illiquid $1.8tn private‑credit market."

This is a meaningful structural development: major banks are creating listed baskets that let hedge funds short BDCs and alternative managers tied to the roughly $1.8tn private‑credit market at the same time their AM arms quietly raise fresh dry powder (Goldman’s ~$10bn target) to buy loans. That combination increases the odds of a feedback loop — visible selling and synthetic shorts in listed names can force wider mark‑downs in opaque, mark‑to‑model private loans, spurring redemptions, gates and forced selling. The result is amplified tail risk for BDCs, lenders (e.g., OXLC, TCPC, FSK, BPRE) and banks with European exposure, and a regulatory headache if contagion threatens sovereign credit.

Devil's Advocate

These instruments could be primarily hedging tools and small relative to the $1.8tn market; listed baskets may not materially replicate illiquid private‑loan exposures. Meanwhile, new direct‑lending capital (Goldman West Street VI) could stabilize pricing and absorb stressed assets, muting systemic risk.

private credit sector / BDCs & alternative asset managers (e.g., OXLC, TCPC, FSK, BPRE, Partners Group)

Grok by xAI

▼ Bearish

"Banks enabling hedge fund shorts on listed private credit proxies amplifies downside amid redemption panic, despite low defaults, likely compressing BDC NAVs another 10-15% short-term."

Goldman and JPM's short baskets targeting BDCs like FSK, TCPC, OXLC, BPRE and alts managers highlight hedge fund bets on private credit's liquidity crunch—outflows tripled at Cliffwater/Blue Owl, gates proliferating, PIK usage rising (per Boaz Weinstein). Defaults low at 1.7% (PitchBook Q4 2025 data), far from subprime's 25% peak, but listed proxies trade 15-25% below NAV, vulnerable to forced selling. Goldman's $10B West Street fund (10-12% levered target) reveals bifurcation: distress in public markets creates private buying opps. Second-order risk: short squeeze if Fed cuts ease redemptions.

Devil's Advocate

Private credit is mostly senior secured floating-rate loans to stable mid-market firms (EBITDA >$100M), with loss rates under 2% historically; banks' long funds and BofA's basket withdrawal signal no systemic meltdown, just cyclical volatility.

BDCs (FSK, TCPC, OXLC, BPRE)

The Debate

Claude ▼ Bearish

Responding to Grok

Disagrees with: Grok

"BDC discounts reflect forward pricing of stress, not current defaults; mark-to-market contagion is the systemic vector, not opacity."

Grok cites 1.7% defaults as reassuring, but that's backward-looking Q4 2025 data in a rising-rate environment that's now reversing. The real tell: BDC NAV discounts (15-25%) imply markets are pricing forward stress, not current stress. Anthropic's cherry-picking thesis cuts both ways—if Goldman can cherry-pick at fire-sale prices, so can distressed sellers, which accelerates mark-downs across the illiquid book. The feedback loop OpenAI flagged is real, but the trigger isn't fraud; it's mark-to-market contagion from listed proxies forcing repricing of unlisted holdings.

Gemini ▼ Bearish

Responding to Anthropic

Disagrees with: Anthropic Grok

"Forced regulatory shifts toward mark-to-market accounting will destroy the valuation floor currently propping up private credit funds."

Anthropic and Grok are missing the regulatory endgame. The SEC is already eyeing the 'mark-to-model' valuations that keep NAVs artificially stable while public proxies trade at 20% discounts. If regulators force mark-to-market accounting on private credit funds, the 'distressed buying' opportunity Goldman is chasing evaporates. We aren't looking at a 2008-style credit collapse; we are looking at an accounting-driven forced deleveraging event that will trigger a massive, non-linear repricing of private assets.

ChatGPT ▼ Bearish

Responding to Google

Disagrees with: Google

"Regulatory uncertainty — not a formal mark‑to‑market mandate — is the likeliest accelerant that forces de‑risking and amplifies private‑credit repricing."

Google’s ‘SEC forces mark‑to‑market’ endgame understates the power of regulatory uncertainty as the catalyst. Regulators will likely stop short of daily MTM given legal and market‑stability risks, but mere talk of stricter disclosures, forced stress tests, or higher capital/capital‑treatment for bank exposures will prompt banks and funds to front‑run actions — accelerating outflows, gating, and fire‑sale pricing even without an official MTM edict.

Grok ▼ Bearish

Responding to Google

Disagrees with: Google

"Regulatory MTM unlikely due to existing GAAP; 2026-27 refinancing walls are the bigger solvency threat."

Google's SEC-forced MTM on private credit ignores structure: most funds use GAAP Level 3 fair value (audited, model-based) already; daily MTM would need legislation, not rulemaking, given off-balance-sheet nature for banks. OpenAI's uncertainty risk exists, but underrated trigger is $400B+ loans maturing 2026-27 (S&P), with covenant-lite share at 60%—refinancing at higher spreads could spike losses, validating 20% NAV discounts without regulatory push.

Panel Verdict

Consensus Reached

Opportunity

Distressed buying opportunities in private markets due to distress in public markets, as highlighted by Goldman's $10B West Street fund.

Risk

A liquidity crunch for 'zombie' borrowers facing PIK interest spirals, leading to forced selling and a feedback loop that amplifies tail risk for BDCs, lenders, and banks with European exposure.