Goldman pitches hedge funds product to bet against corporate loans, source says

By Saeed Azhar and Manya Saini

NEW YORK, March 9 (Reuters) – Wall Street investment banking giant Goldman Sachs is pitching hedge funds a financial product that allows them to take a short or long position on corporate loans, a source familiar with the matter said.

The product, known as a total return swap, is a derivative contract that allows investors to profit from changes in market value of the loans, the source said.

No trades have been executed using this strategy so far, the source said.

The Financial Times earlier reported the news, saying the Wall Street bank has offered clients complex trades that would allow them to profit from further falls in loans made to software companies that have come under pressure in recent months.

“As a market-maker, we obviously engage constantly with clients on facilitating the trading strategies they want to execute. This happens every day, across many asset classes, in every market environment,” a Goldman spokesperson said in an email.

Software stocks have tumbled this year as investors worry that rapid advances in artificial intelligence could disrupt the traditional business models.

Traders fear that AI agents capable of performing complex tasks across multiple applications could erode growth at legacy software-as-a-service companies.

No major debt deals backed by software companies have been sold in the primary market since Oracle’s $25 billion debt package priced on February 2.

Deals have been sidelined as investors worry that artificial intelligence could replace many of the software products and services that tech companies provide.

(Reporting by Manya Saini in Bengaluru and Saeed Azhar in New York; Editing by Shilpi Majumdar and Matthew Lewis)