Morgan Stanley has imposed limits on redemptions from one of its private credit funds after investors requested to divest about 11% of outstanding shares, according to a regulatory filing. The move follows increased scrutiny of the $2 trillion private credit market, which has been hit by recent credit issues and investor concerns about the health of loan portfolios and borrower flexibility amid high interest rates.
The North Haven Private Income Fund (PIF) met about $169 million, or 45.8 percent, of tender requests for the quarter, the Wall Street banking company said in a letter to investors. Morgan Stanley cited challenges in the private credit sector, including uncertainty surrounding the realization of mergers and acquisitions, speculation about credit deterioration, and declining asset yields. The company manages investments and provides services to a substantial and diverse client base worldwide that includes corporations, governments, institutions and individuals.
According to the bank, the goal of limiting withdrawals is to prevent asset sales during “periods of market volatility” and maximize risk-adjusted returns for investors over the long term. As of January 31, PIF had invested in 312 lenders across 44 industries, with credit fundamentals broadly stable. Morgan Stanley said it will complete tender applications for the outstanding 5% units by December 31 as per the private placement memorandum.
Concerns about the impact of artificial intelligence on software companies’ earnings and their ability to service debt are also affecting private credit. Recently, BlackRock and Blackstone disclosed limits on withdrawals from their debt and private credit funds, respectively, after experiencing a surge in redemption requests. JPMorgan Chase has also downgraded some loans for private credit funds after assessing market turmoil in the software sector.
Post Comments: 2
