Morgan Stanley capped investor withdrawals at 5% from its $7 billion private credit fund after 11.6% redemption requests in Q2, fulfilling only 43% of exit demands.
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Morgan Stanley caps fund withdrawals at 5% after 11.6% exit requests
Morgan Stanley capped investor withdrawals at 5% from its $7 billion private credit fund after shareholders sought to redeem 11.6% of units in the second quarter, the latest sign of stress in the $1.8 trillion private credit market.
"The composition as well as the stabilization in the level of request activity as compared to the first quarter may be indicative of durability in the Company's investor base," Morgan Stanley Investment Management said in a letter to investors.
The North Haven Private Income Fund will fulfill 43% of the redemption requests, with about half coming from investors who were unable to fully exit in the prior period, when withdrawal requests reached 10.9%. After accounting for new subscriptions and dividend reinvestments, the net reduction in net asset value was about $102 million, or 3.2% of the March 31 value. A smaller affiliated vehicle, North Haven Private Income Fund A, received 7.2% in redemption requests and will meet requests up to its 5% threshold.
The restrictions highlight the liquidity mismatch at the heart of non-traded business development companies, which offer periodic redemptions while holding illiquid private loans. Funds run by Apollo Global Management Inc., Blackstone Inc. and BlackRock Inc. have also limited investor withdrawals this quarter. Morgan Stanley shares fell 4% in after-hours trading following the news.
The PIF held investments in 301 borrowers across 45 industries as of May 31, with software accounting for 22.7% of exposure — a sector that has fueled redemption fears as artificial intelligence disruption threatens legacy business models. Private credit funds geared toward retail investors saw historic redemptions in the first quarter, driven by mounting concerns over lending standards and rising fears that AI could undermine the software sector.
Analysts and executives have warned that non-traded BDCs are likely to face slower inflows and elevated redemptions in the coming quarters as market volatility persists. The last time redemption requests at major private credit funds exceeded 10% was in the first quarter, when several funds moved to block full exits for the first time since the 2023 regional banking crisis.
This article is for informational purposes only and does not constitute investment advice.
[1] Morgan Stanley Caps Private Credit Fund After 11.6% Exit Request - Bloomberg.com[2] Morgan Stanley caps withdrawals at private credit fund after rising pullout requests - Reuters[3] Morgan Stanley limits withdrawals at flagship private credit fund - Private Equity Wire[4] Ares Caps Private-Credit Fund Redemptions Again as 14% Seek Exits
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