Hedge fund traders are looking to cash in on volatility in the private credit market by shorting BDC bonds, according to 9fin sources.
A number of funds have caught the eye of short traders, sources told 9fin, but the more popular names garnering said attention include BlackRock TCP Capital Corp., FS KKR Capital Corp., and Blue Owl Technology Finance Corp.
Hedge funds are targeting debt issued by BDCs with high exposure to software credits, an area that has come under the crosshairs over concerns of potential AI disruption from new tools like Claude Code. Investors are also looking at funds that have cited significant disruption in their portfolio, like in the case of TCPC, which reported that it is expecting a 19% decline in its NAV, and FSK, which has seen a sharp decline in share price after slashing its distribution by over 30%.
One bond discussed was Blue Owl Technology Finance’s 6.125% SUN due 2031, which had priced at T+255bps in late January, was now being quoted at a yield of 7.04% and T+350bps on Friday, according to ICE Vantage data.
Blue Owl is one of the most heavily exposed BDCs to the...
