Morgan Stanley private credit fund redemptions remain elevated in third quarter

In the third quarter, Morgan Stanley's North Haven Private Income Fund (PIF) experienced continued redemption activity, with investors withdrawing 11.4% of their shares. This figure marked a slight decrease from the 11.6% pulled in the previous quarter. The fund is obligated to repurchase 5% of shares, which is standard for such investment vehicles.

Wealthy investors have been pulling funds from non-traded private credit funds due to concerns about lending standards and the potential impact of artificial intelligence on software companies, which are key borrowers for direct lenders. While redemption pressure may be easing as asset managers work through a backlog of unfulfilled withdrawal requests, nearly two-thirds of the repurchase requests in the latest quarter came from investors who were unable to fully cash out in the prior two repurchase offers.

According to a regulatory filing, the fund anticipates that the composition and stabilization of request activity indicate the resilience of its investor base. Upon completing this quarter's repurchases, investors who sought a full tender of their units during the previous two repurchase offers will have received more than 80% of their requested tendered amount. The hit to PIF's net asset value is projected to be around $101 million, after accounting for new subscriptions and dividend reinvestments.

North Haven Private Income Fund A (PIF A), a smaller fund managed by Morgan Stanley, logged around 6.8% in redemption requests, compared to 7.2% in the previous quarter. Data from prominent private credit vehicles operated by Apollo, Ares, and Blue Owl is anticipated to be released in the coming weeks.