Morgan Stanley has placed limits on redemptions from one of its private credit funds following investor requests to withdraw nearly 11% of outstanding shares, according to a regulatory filing. This action follows increasing scrutiny of the $2 trillion private credit market, driven by recent credit issues and investor concerns about loan portfolio health and borrower resilience amidst higher interest rates.
The Wall Street banking giant stated in a letter to investors that the North Haven Private Income Fund (PIF) satisfied approximately $169 million, or 45.8%, of the tender requests for the quarter. Morgan Stanley cited challenges in the private credit sector, including uncertainty surrounding a mergers and acquisitions recovery, speculation about credit deterioration, and a contraction in asset yields. The company manages investments and provides services worldwide to a substantial and diversified client base that includes corporations, governments, institutions, and individuals.
According to the bank, limiting withdrawals aims to prevent asset sales during “periods of market dislocation” and maximise risk-adjusted returns for investors in the long term. As of January 31, the PIF had investments in 312 borrowers across 44 industries, with credit fundamentals remaining broadly stable. Morgan Stanley communicated that it would fulfill tender requests for 5% of units outstanding as of December 31, consistent with the private placement memorandum.
Concerns about the impact of artificial intelligence on software companies’ earnings and their ability to repay loans are also impacting private credit. Recently, BlackRock and Blackstone have disclosed limitations on withdrawals from their debt and private credit funds, respectively, after experiencing surges in redemption requests. JPMorgan Chase has also reduced the value of some loans to private credit funds following a review of the software sector’s market turmoil.
