Big Short’s Danny Moses turns bearish on credit markets

Moses cited narrow credit spreads and mounting risks.

Hedge fund manager Danny Moses, best known for his correct bet against the U.S. housing market before the 2008 financial crisis, has returned to the bearish side of the credit markets, warning that investors may be underestimating risks building within the rapidly expanding private credit sector.

Moses has established new short positions tied to lower-rated corporate debt, according to a Bloomberg report, arguing that years of abundant capital and aggressive lending have left parts of the market vulnerable should economic conditions deteriorate.

The move comes as private credit has become one of the fastest-growing areas of global finance, with institutional investors increasingly allocating capital to direct lending strategies in search of higher yields.

Indeed, the private credit market was valued at $3 trillion at the start of 2025, up from $2 trillion in 2020, according to a report by Morgan Stanley. It is estimated to reach approximately $5 trillion by 2029.

The sector has also attracted growing interest from insurers and wealth managers, broadening its reach beyond traditional institutional investors.

While defaults have remained relatively contained, some market participants have questioned whether rising interest rates and slowing economic growth could expose weaknesses in highly leveraged borrowers that have relied on private financing.

Moses has been among the industry's most vocal critics, arguing that credit spreads remain too narrow to fully reflect the risks facing lower-rated borrowers.

The founder of Moses Ventures believes persistent demand for yield and expectations of a soft economic landing have helped keep risk premiums compressed. However, he has warned that deteriorating corporate fundamentals could prompt a sharp repricing if economic conditions weaken and default rates begin to rise.

His latest positioning reflects a more cautious view of credit markets at a time when equity indices continue to trade near record highs and investor sentiment has remained relatively resilient.

Rather than forecasting a repeat of the 2008 financial crisis, Moses appears to be arguing that current market pricing leaves investors with little room for error should credit conditions deteriorate.

The renewed bearish stance also highlights a growing divergence among hedge fund managers. Many managers are becoming increasingly selective as tighter monetary conditions place pressure on corporate borrowers and refinancing costs remain elevated.

For investors, Moses' move is likely to reinforce scrutiny of the private credit sector in the months ahead.

Market participants will be watching default rates, lending standards and insurers' exposure to private assets for signs that the industry's rapid expansion is beginning to test the resilience of the broader financial system.

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