“Morgan Stanley caps withdrawals at private credit fund after rising pullout requests." Reuters reports Morgan Stanley’s $7B private credit fund is getting slammed with withdrawal requests again.
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The private credit industry is facing a problem that only shows up when investors want their money back.
Liquidity.
Morgan Stanley has once again restricted withdrawals from its $7 billion North Haven Private Income Fund after redemption requests exceeded what the fund could handle.
Investors asked to withdraw 11.6% of the fund this quarter.
That was even higher than the 10.9% requested last quarter.
But under the fund’s rules, only 5% can be redeemed per quarter.
As a result, Morgan Stanley honored only about 43% of withdrawal requests.
The rest remain stuck waiting.
What makes this more concerning is that roughly half of the new redemption requests came from investors who were already blocked during previous withdrawal rounds.
In other words, the line of people waiting to get out is getting longer.
This is becoming a pattern rather than a one-off event.
The private credit market has grown to roughly $1.8 trillion after years of investors chasing higher yields in a low-rate world.
The pitch was simple:
Higher income than traditional bonds.
Less volatility than public markets.
But there was always a tradeoff.
The loans are illiquid.
When everyone wants cash at the same time, the exit door gets very small.
Morgan Stanley is not the only firm dealing with the problem.
Apollo, BlackRock, Ares, and other major players have also faced redemption pressure and withdrawal limits in parts of their private credit platforms.
At the same time, a stronger dollar and tighter financial conditions are creating new stress across credit markets.
The concern is not that private credit is collapsing today.
The concern is that more investors are trying to leave than enter.
That matters because Q1 reportedly marked one of the first periods where outflows exceeded inflows across parts of the sector.
Private credit grew rapidly when money was easy.
Now it is facing the first serious test of what happens when investors decide they want liquidity instead of yield.
That is when the real structure of the market gets exposed.
The biggest risk in private credit may not be the loans.
It may be discovering that thousands of investors are heading for the same exit at the same time.