• Life insurers are the one private credit proxy where shorts haven't backed off. BDC and alt manager shorts have eased since June.

• The short has paid in only two of 13 names. Lincoln and F&G are down this year; the rest are up 18% on average.

• Active long holders are adding. Active holdings are up 7% on average this year and higher in nine of 13 names.

"Hedge funds can't short private loans and credit directly," S3 founder Bob Sloan said on Risk & Return this week. "So what they do instead is they short proxies." In Ares and Blackstone, that trade has paid, and shorts are now taking profits. As we wrote last week, short interest in both more than doubled as the stocks fell about a third. Since their summer peaks, short shares are down 15% in Ares and 27% in Blackstone.

Short notional in the 13 listed US life insurers has doubled over the past year to $7.2 billion. Since the end of July alone, short shares have risen in 12 of the 13, by an average of 19%. Lincoln's short shares are up 176% this year and the stock is down 8%; F&G's are up 145% and the stock is down 30%.

Active managers, who hold $46 billion in these names, have added this year, even in Lincoln (+22%) and F&G (+41%) as those two stocks fell. Shorts are growing faster, though: short shares are up 65% on average this year against 7% for active holdings, and the S3 Active Long-to-Short ratio, active long dollars divided by short dollars, has fallen from 9.0x to 6.4x. One group to watch are Jackson Financial, Globe Life and Genworth, the names where active holdings are declining while shorts build.

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