S&P Dow Jones launches new CDS Index facilitating bets against private credit

S&P Dow Jones Indices has launched a new credit-default swap (CDS) index designed to give investors a way to take exposure against the private credit market, reflecting growing concern about stress in the sector following years of rapid expansion, according to a report by Reuters.

The new index, which will be traded by major banks including Bank of America, Barclays, Deutsche Bank and Goldman Sachs, expands credit derivatives coverage to include a broader set of financial institutions, including business development companies (BDCs) that are closely tied to private credit markets.

Credit-default swaps function as insurance-like instruments that pay out if a borrower fails to meet debt obligations. The new index effectively allows investors to express bearish views on a segment of finance that has grown significantly since the post-2008 expansion of private lending.

The product arrives as private credit funds face increasing scrutiny amid signs of liquidity pressure and investor withdrawals, marking one of the most challenging periods for the asset class in recent years. Concerns have also grown around the potential impact of shifting economic conditions and technology disruption on borrowers within these portfolios.

The index includes a diversified basket of 25 North American financial entities, covering banks, insurers, REITs and BDCs, with exposure to firms such as Apollo Global Management, Ares Capital and Blackstone through its private credit vehicle.

Market participants say the product reflects rising demand for tools to hedge or speculate on credit risk in private markets, which have traditionally been less transparent and harder to trade than public debt markets.

The launch also underscores growing integration between public credit derivatives markets and private lending, as investors reassess risk in leveraged finance structures and seek more liquid instruments to manage exposure.

Banks are expected to begin offering the index to clients imminently, further expanding the toolkit available for trading credit risk across both traditional and alternative lending markets.