Morgan Stanley and Cliffwater have both moved to limit redemptions at their private credit funds following a surge in withdrawal requests, adding to a growing body of evidence that stress is building across one of finance's most closely watched asset classes.
Morgan Stanley restricted redemptions at its private credit fund after withdrawals climbed sharply, according to reporting by Reuters and Bloomberg. Cliffwater, which manages a fund with approximately $33 billion in assets, separately capped payouts after facing its own wave of redemption pressure, the Financial Times reported.
Cliffwater's fund is expected to see withdrawals exceed 7 per cent of its total assets, according to Seeking Alpha, a scale of outflows that underscores the severity of investor appetite to exit the vehicle.
The moves by two prominent names have intensified what Bloomberg has described as a redemption pressure roller coaster for private credit, an asset class that has attracted enormous institutional and retail capital over the past several years on the promise of higher yields and lower volatility than public markets.
George Noble, a veteran fund manager, went further in his assessment, warning via Business Insider that a private credit crisis may be unfolding in real time. His comments reflect a chorus of disapproval that MarketWatch noted has grown steadily louder around the sector.
The Wall Street Journal reported that Cliffwater's fund has joined a broader list of private credit vehicles that have moved to limit redemptions, suggesting the pressure is not isolated to a single manager or strategy but is becoming a more systemic feature of the market.
Private credit funds, many of which are structured as semi-liquid vehicles designed to offer periodic redemption windows rather than daily liquidity, have long faced questions about the mismatch between the illiquid nature of their underlying loans and the relative ease with which investors can request their capital back. Those questions are now becoming acute.
The redemption caps imposed by Morgan Stanley and Cliffwater are a mechanism built into fund structures precisely to manage such scenarios, allowing managers to limit outflows to a set percentage of assets in any given period. Their activation, however, can itself prompt further concern among investors who remain in the fund and may accelerate the very pressure managers are trying to contain.
