Investors in Morgan Stanley's North Haven Private Income Fund are still trying to get their money out faster than the fund is willing to return it. In the latest quarterly offer, investors tendered 11.4% of the fund's shares for repurchase, according to a recent regulatory filing. That's only slightly below the 11.6% seen in the prior quarter.
But the fund, a non-traded private credit vehicle, is again sticking to its standard 5% quarterly repurchase cap. That means it will buy back only 5% of shares this quarter, leaving a significant portion of redemption requests unmet.
Why the cap exists
Private credit funds like North Haven invest in loans to companies, often middle-market businesses that may not have easy access to public debt markets. These investments are typically illiquid, meaning they can't be sold quickly at a predictable price. To manage that mismatch, most non-traded funds limit how much they will repurchase each quarter—commonly around 5% of outstanding shares.
The cap is designed to prevent a run on the fund, where too many investors try to exit at once and force the fund to sell assets at fire-sale prices. By limiting redemptions, the fund can sell holdings more gradually and avoid disrupting the portfolio's returns for remaining investors.
Nearly two-thirds of the latest redemption requests came from investors who weren't fully paid out in the prior two offers. That points to a simple queue: when withdrawals exceed the cap, unmet requests roll over to the next quarter, and those investors get priority. This can create a backlog, with some investors waiting several quarters to get all their money back.
What it means for investors
For everyday investors, this situation highlights a key difference between private credit funds and more traditional investments like mutual funds or ETFs. With a mutual fund, you can typically sell your shares any business day at the fund's net asset value. With a non-traded private credit fund, your ability to exit is limited by the fund's repurchase schedule and caps.
That's not necessarily a red flag—many investors accept these restrictions in exchange for potentially higher yields and diversification. But it does mean you should be comfortable tying up your money for longer periods and be prepared for the possibility that you can't get out when you want to.
The persistent high redemption demand at North Haven is worth watching. It suggests some investors are becoming less willing to hold this type of asset, possibly due to concerns about credit quality, interest rates, or simply a need for liquidity. Similar dynamics have played out across the private credit space, as redemption freezes in other markets have shown how quickly liquidity can dry up.
Broader context
Private credit has grown rapidly in recent years, as banks pulled back from lending and investors chased higher yields. But the asset class is now facing more scrutiny as interest rates stay higher for longer, which can strain borrowers' ability to service debt. If defaults rise, funds may need to write down the value of their loans, which could further dampen investor appetite.
Morgan Stanley's North Haven fund is one of the largest in the space, so its redemption data is closely watched as a barometer for investor sentiment. The fact that demand remains above 11% for a second straight quarter suggests that some investors are still eager to reduce their exposure, even as the fund continues to meet its obligations.
For those considering private credit funds, the takeaway is to read the fine print on redemption policies and understand that your money may not be as accessible as you'd like. As institutional investors have warned, returns may be lower going forward, and liquidity will be a key factor to weigh.
The fund's next moves will be closely watched. If redemption requests continue to outpace the cap, the queue could grow, and the fund may need to consider other measures, such as lowering the cap further or selling assets to raise cash. For now, the fund is sticking to its standard policy, but the pressure remains.
