Morgan Stanley limited private credit fund redemption requests again

Morgan Stanley’s North Haven Private Income Fund has again limited investor withdrawals after redemption requests exceeded the vehicle’s quarterly repurchase capacity, highlighting continued liquidity pressure across the private credit market, according to a report by Reuters.

The reports cites a recent regulatory filing as showing that investors sought to redeem units representing 11.4% of the fund’s outstanding shares in the third-quarter tender offer, only marginally below the 11.6% requested in the previous quarter. The fund will repurchase 5% of outstanding units, meaning requests will be fulfilled on a prorated basis.

The latest figures extend a run of elevated redemption demand at the fund, as private credit managers continue to deal with investors seeking greater liquidity from semi-liquid vehicles. North Haven Private Income Fund is among a number of private market funds that have faced requests exceeding their contractual repurchase limits.

Morgan Stanley said nearly two-thirds of the latest redemption requests came from investors whose withdrawal requests had already been prorated during the previous two repurchase periods. Following the latest round of repurchases, investors who had sought to fully tender their holdings during those earlier periods will have received more than 80% of the amounts they originally requested, according to the fund’s investor update.

The fund said the composition of the latest requests and the relative stabilisation in activity could indicate greater resilience among its investor base. Morgan Stanley also pointed to improving conditions in broadly syndicated loans, including a recovery in software-related credit, in its assessment of the market backdrop.

Investor demand for liquidity has emerged amid wider scrutiny of private credit, including questions around lending standards and the ability of some borrowers, particularly software companies, to adapt to disruption from artificial intelligence. At the same time, redemption pressure at some major vehicles has begun to moderate as managers work through accumulated withdrawal requests.

The latest repurchase is expected to reduce the North Haven fund’s net asset value by approximately $101m after taking account of new subscriptions and dividend reinvestments, according to the fund.

A smaller Morgan Stanley vehicle, North Haven Private Income Fund A, also received redemption requests above its 5% repurchase limit. Requests represented approximately 6.8% of shares, down from 7.2% in the previous quarter.