The $1.8 trillion private credit market is facing severe liquidity tests as Morgan Stanley and BlackRock Inc. move to limit investor outflows, although industry experts tell Benzinga that these “gates” serve as structural “stabilizers” rather than signs of collapse.
Morgan Stanley has become the latest Wall Street giant to block redemptions after investors tried to buy back nearly 11% of its North Haven private income fund (PIF).
According to its quarterly threshold, the fund met only 45.8% of those requests. This follows a similar move by BlackRock, which raised limits of 9.3% of net asset value after asking to bail out of its $26 billion HLEND fund.
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While these restrictions have bothered some investors, supporters argue that the measures are necessary. Louis NovillerCIO of Navellier & Associates, notes that “Blackrock’s 5% quarterly redemption limit is written into the private credit fund’s charter” specifically to preserve long-term value.
Emphasis on the structural reality of wealth class, John Cookchief credit investment officer at Corbin Capital Partners, told Bloomberg that “you can’t create liquidity from an illiquid asset class”.
The pressure is also forcing traditional banks to retreat. JPMorgan Chase & Co. As a precautionary measure private credit funds have introduced a “lending restriction on loans related to software companies”.
Additionally, the bank has reportedly “reduced the value of some loans to private credit funds” after reviewing how market disruptions — particularly AI’s potential to wipe out software revenue — are affecting the sector.
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Despite the increase in outflows, some analysts remain bullish on the US market. Naullier describes the U.S. economy as an “oasis” compared to its global peers.
While he acknowledges that default rates have reached 9% for some funds, he suggests that the Federal Reserve’s anticipated rate cuts will put pressure on variable-rate loans, making a “worst-case” 15% default scenario unlikely.
As US financial conditions tighten, capital is “slowly moving towards emerging markets”. John MorelloChief Commercial Officer of B2BROKER, identifies India as a “sweet spot” for yield and diversification, highlighted by 360 ONE Asset’s recent fund of nearly $400 million.
