Morgan Stanley causes alarm by limiting withdrawals from one of its private credit funds
The Wall Street giant's decision comes after investors sought to withdraw more than 11% of the funds
BarcelonaMorgan Stanley, one of Wall Street's giants, has decided to limit redemptions from one of its private credit funds. The decision was made after investors attempted to withdraw nearly 11% of the funds, according to a filing with the markets regulator, Reuters reports.
Last week, a fund from the giant BlackRock Morgan Stanley made the same decision. This comes on top of a string of bad news affecting the US private credit market in recent months. These types of assets, widespread in the US, represent a market of approximately $2 trillion. Investors are questioning the health of loan portfolios and the resilience of borrowers in a higher interest rate environment and want to withdraw money from specialized funds.
The fund affected by the measure is called the North Haven Private Income Fund (PIF). Morgan Stanley explained that limiting withdrawals will help prevent asset sales during "periods of market dislocation." This is stated in a regulatory filing published Wednesday, which shows that the firm returned approximately $169 million, or about 45.8%, of withdrawal requests for the quarter.
"As marketed and in accordance with the disclosure in our private placement memorandum, we will fulfill tender requests for 5% of the outstanding units as of December 31," the bank's investment management division said in a letter to investors. The bank has stated that "the spread between the strongest and weakest credit is widening."