S&P Dow Jones Indices has launched a new credit‑default swap (CDS) benchmark designed to give investors exposure to the increasingly influential private credit market. The CDX Financials index links CDS contracts to financial firms with significant private credit exposure, offering a new tool for hedging risk or expressing directional views in a sector facing rising scrutiny.
The index comprises 25 North American financial entities, including banks, insurers, real estate investment trusts and business development companies (BDCs). CDS instruments provide protection against the risk of a borrower defaulting on its debt. According to Nicholas Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices, this is the first CDS index to include BDCs, marking a significant extension of CDS coverage into private credit.
The launch comes as private credit faces its most significant test since expanding rapidly after the 2008 financial crisis. Investor redemptions from non‑traded private credit funds have increased amid concerns that advances in artificial intelligence could undermine software companies that have attracted substantial private credit financing.
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Major platforms including Apollo Debt Solutions, Ares Capital and Blackstone Private Credit Fund will collectively account for about 12% of the equally weighted index.
Several global banks, including Bank of America, Barclays, Deutsche Bank and Goldman Sachs, are expected to begin selling the derivatives soon, reflecting growing demand for tools to manage private credit risk.
