Morgan Stanley's North Haven Private Income Fund, a $7 billion private credit fund, has limited investor withdrawals to 5% of shares for the second quarter of 2026. This decision comes after investors requested to redeem 11.6% of their shares, an increase from the 10.9% requested in the first quarter. The fund, the original 2021 non-traded BDC (SEC file number 814-01489), was first "gated" in late 2025 and this marks the second time in three quarters that the fund has capped withdrawals.
This move by Morgan Stanley reflects a broader trend within the $1.8 trillion private credit market, where major funds are experiencing higher redemption requests and are often capping exits. For instance, Apollo Debt Solutions BDC, a larger $26 billion fund, also capped redemptions at 5% after facing 16.8% in requests. Blackstone Private Credit Fund (BCRED), an even larger $79 billion fund, returned to its 5% cap after approximately 10% in requests.
Morgan Stanley indicated in a letter to investors that limiting withdrawals helps to avoid asset sales during "periods of market dislocation" and aims to maximize risk-adjusted returns. The firm's communication stressed that the 5% quarterly redemption cap is "operating as designed," framing it as a feature rather than a flaw of the product. This situation highlights the challenges distributors face in explaining these caps to wealth management clients with shorter liquidity tolerance.
The increasing redemption requests suggest growing stress in the private credit market, with some analysts noting that "dispersion between stronger and weaker credit is increasing." The cumulative effect of these caps means that an investor seeking to fully exit may face a year or more to do so, as tender requests roll forward across quarters. Asset manager equities, including Morgan Stanley (MS), Apollo (APO), and Blackstone, saw declines in value following these announcements, with businesses relying heavily on perpetual retail vehicles trading at a discount.
