Summary:
Morgan Stanley limited withdrawals from its North Haven Private Income Fund after redemption requests reached nearly 11% of shares outstanding.
The fund returned about $169 million, or 45.8% of tender requests, due to quarterly redemption caps.
Investor scrutiny is increasing across the $2 trillion private credit market.
JPMorgan has marked down loans used as collateral by private credit firms, reducing their borrowing capacity.
The adjustments largely affect software company loans, where AI disruption fears are rising.
Higher redemptions have also appeared at funds run by BlackRock, Blackstone and Blue Owl.
Banks appear to be taking precautionary steps to reduce leverage exposure in the sector.
Fresh signs of strain are emerging in the fast-growing private credit market as redemption pressures mount at major funds and banks move to reduce risk exposure to the sector.
Morgan Stanley has limited investor withdrawals from one of its private credit funds after redemption requests surged. In a regulatory filing, the bank said investors sought to redeem nearly 11% of shares in the North Haven Private Income Fund (PIF), significantly exceeding the fund’s quarterly withdrawal cap.
The fund returned roughly $169 million, or about 45.8% of the requested redemptions, according to a letter sent to investors. As outlined in its offering documents, the fund limits withdrawals to around 5% of outstanding units per quarter to prevent forced asset sales during periods of market stress.
Morgan Stanley said restricting withdrawals helps avoid liquidating assets at depressed valuations and protects long-term investor returns. The bank noted that credit fundamentals within the fund remain broadly stable, with the portfolio spanning 312 borrowers across 44 industries as of late January.
Nevertheless, the episode underscores rising scrutiny of the roughly $2 trillion private credit market, which has expanded rapidly in recent years as banks retreated from direct lending after the global financial crisis.
Investor concerns have intensified following several recent credit issues and questions about the durability of loan portfolios in a higher interest rate environment. Analysts say uncertainty over the pace of mergers and acquisitions, speculation about credit deterioration and falling asset yields are weighing on sentiment.
In earlier news, JPMorgan Chase is reportedly reducing its exposure to the sector by marking down the value of loans held as collateral by private credit firms that borrow from the bank.
The markdowns primarily affect loans to software companies, where rapid advances in artificial intelligence have raised concerns that some business models could face disruption, potentially weakening borrowers’ ability to repay debt.
By lowering the valuation of these loans, JPMorgan is effectively reducing how much private credit firms can borrow against them in financing arrangements known as “back-leverage.” In some cases, firms may need to post additional collateral.
The move appears to be a precautionary step rather than a response to widespread loan losses. However, it signals that large banks are increasingly wary of risks building in a market that layers leverage on top of leveraged corporate loans.
Redemption pressure has also surfaced elsewhere in the sector. BlackRock recently restricted withdrawals from a flagship debt fund, while Blackstone reported elevated redemption requests at its BCRED private credit vehicle.
Together, the developments suggest investors are reassessing exposure to private credit as borrowing costs remain elevated and technological disruption reshapes parts of the corporate landscape.
This article was written by Eamonn Sheridan at investinglive.com.
