Morgan Stanley caps withdrawals at private credit fund after rising pullout requests

June 23 (Reuters) - Morgan Stanley ‌has limited redemptions ​again ​at its $7 billion flagship private credit fund after investors sought to withdraw almost 11.6% of units outstanding, a regulatory filing ‌showed on Tuesday.

North Haven Private Income Fund (PIF) said it would ⁠meet 43% of second‑quarter redemption requests after investors sought to withdraw about 10.9% of ‌the fund in the prior ‌quarter, adding that about half of the latest requests came from investors who had been unable to fully cash out earlier.

"We believe that ​both the composition as well as the stabilization in the level of request activity as compared to the first quarter may be ⁠indicative of durability in the Company’s investor base," the bank's investment management arm said in the ​letter.

Private credit funds geared toward retail investors saw historic redemptions in the first quarter, driven by mounting concerns over ​lending standards and rising fears that AI ‌could undermine the software sector - a key area of exposure for many lenders.

Morgan Stanley said the PIF was invested ⁠in 301 borrowers across 45 industries as of May 31 and had around 22.7% exposure to the software industry.

Conditions have yet to stabilize around business development ⁠companies (BDCs), with funds run by Apollo Global, Blackstone and BlackRock also limiting investor withdrawals.

PIF ​said that after accounting for new subscriptions and dividend reinvestments, the net hit to its net asset value was about $102 million, or 3.2% of its March 31 value.

Separately, ‌a smaller affiliated fund, North Haven Private Income Fund A, faced 7.2% redemption requests, 5% of which will ‌be honored at the customary threshold level.

Analysts and executives have warned that ⁠non‑traded BDCs are likely to face ‌slower inflows and elevated ​redemptions in the coming quarters, as market volatility persists.

(Reporting by Pragyan Kalita in Bengaluru; Editing by Vijay Kishore and ‌Anil D'Silva)

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