Morgan Stanley limited private credit fund redemption requests again

Morgan Stanley's North Haven Private Income Fund has once again imposed limits on investor withdrawals, as redemption requests surpassed the fund's quarterly repurchase capacity, according to Reuters. The latest regulatory filing reveals that investors sought to redeem units representing 11.4% of the fund's outstanding shares during the third quarter, slightly below the 11.6% requested in the prior period.

The fund will repurchase 5% of outstanding units, fulfilling requests on a prorated basis. This marks the continuation of elevated redemption demand at the fund, as private credit managers grapple with investors seeking greater liquidity from semi-liquid vehicles. Nearly two-thirds of the latest redemption requests stemmed from investors whose withdrawal requests had already been prorated during the previous two repurchase periods.

Following the most recent repurchases, investors who had sought full tendering during earlier periods would have received more than 80% of their original requests, as per the fund's investor update. Morgan Stanley attributes the stabilization in investment activity to improving conditions in syndicated loans, including a recovery in software-related credit.

Investor demand for liquidity has surged due to heightened scrutiny of private credit, focusing on lending standards and the adaptability of certain borrowers, especially in the software sector, to AI-driven disruption. The latest repurchase is projected to reduce the North Haven fund's net asset value by around $101 million, taking into account new subscriptions and dividend reinvestments.

A smaller Morgan Stanley fund, North Haven Private Income Fund A, also received redemption requests exceeding its 5% repurchase limit, representing approximately 6.8% of shares, down from 7.2% in the prior quarter.