Wall Street banks begin trading derivatives; betting on the private loan market crisis.

J.P. Morgan, Barclays, and other Wall Street banks have started trading products that can profit when private credit funds are in trouble, as asset management firms are looking for ways to bet on industry turmoil. According to sources familiar with the matter, these banks have recently started trading credit default swaps against flagship private credit funds operated by Blackstone, Apollo Global Management, and Ares Management. Credit default swaps provide compensation when these funds default on their debt, and can be used to bet on or hedge against industry pressures. The introduction of these new tools comes as demand from investors for new strategies aimed at expressing views on these funds continues to grow. The sources added that banks including J.P. Morgan, Barclays, Morgan Stanley, and Citigroup are all offering contract trading for these three funds, and noted that current trading activity is relatively mild.