Morgan Stanley is preparing to launch a new interval fund focused mainly on private credit at a moment when investors are trying to pull record sums from similar semi-liquid vehicles, exposing a sharp split between Wall Street’s drive to widen access to alternative assets and growing unease over liquidity, valuations and borrower risk. The move comes less than a month after the bank limited withdrawals at one of its own private credit funds when tender requests exceeded its preset cap.
The planned product would extend Morgan Stanley’s push into the fast-growing private markets business even as strains in the sector become harder to ignore. In March, investors sought to redeem almost 11% of the outstanding units in Morgan Stanley’s North Haven Private Income Fund, forcing the bank to stick to its 5% tender limit and return only about $169 million, or 45.8% of the requests. Morgan Stanley told investors the restriction was designed to avoid selling assets during a period of market dislocation and said credit fundamentals in the portfolio remained broadly stable.
That backdrop has not stopped the broader wealth industry from trying to package private credit for a wider client base. Interval funds and non-traded business development companies have become a favoured route for fund managers seeking to tap affluent individuals who want yields above those available in public fixed income markets. These structures promise periodic liquidity, usually through quarterly repurchase offers, but the assets they hold are often far less liquid than the shares investors buy. When sentiment sours, that mismatch becomes visible very quickly.
Across the market, redemption pressure has intensified. Barings said this week that investors in its $4.9 billion private credit fund sought to redeem 11.3% of shares in the first quarter, with the manager meeting only 44.3% of those requests. Reuters reported that private credit vehicles tracked by Robert A. Stanger returned a record $7.4 billion to investors in the first quarter as of April 2. KKR also limited withdrawals from one of its non-traded funds after repurchase requests rose above its threshold, while other large managers including Apollo, Ares, BlackRock and Morgan Stanley have adhered to similar caps.
Yet the pressure is not uniform. Goldman Sachs disclosed that redemption requests at its private credit fund came in just below its 5% cap in the first quarter, allowing it to meet all withdrawals. The bank said more than 80% of investors in its wider private credit platform were institutional, helping to shield it from the sharper swings hitting vehicles with heavier retail participation. Goldman also said it was seeing more than $10 billion of institutional commitments in documentation and diligence, suggesting some professional investors view the sell-off as an opening rather than a warning sign.
The private credit industry has grown rapidly since banks pulled back from parts of leveraged lending after the global financial crisis. Estimates now place the market at roughly $1.8 trillion to $2 trillion, making it too large for regulators to dismiss yet still small enough, in the view of some officials, to avoid posing an immediate systemic threat. Morgan Stanley has said private credit accounted for about 30% of the US leveraged finance market in 2025, up from 13% a decade earlier. That expansion has brought more retail money into a corner of finance once dominated by institutions.
What has changed is the tone of the debate. Concerns over opaque valuations and underwriting standards were already present after the failures of First Brands and Tricolor. They have since been reinforced by questions over how artificial intelligence could hurt software borrowers, a major client base for direct lenders, by undermining pricing power and business models. Reuters has reported that some private lenders are increasingly allowing stressed borrowers to defer cash interest through payment-in-kind features, a practice that can buy time but can also mask underlying strain.
Officials are watching closely. Federal Reserve Chair Jerome Powell said on March 30 that regulators were monitoring the sector for signs of contagion but did not currently see the makings of a broader systemic event. A day later, Bank of England Governor Andrew Bailey warned that the opacity of private credit could amplify shocks in a manner reminiscent of the confidence problems seen in 2008, even if he stopped short of predicting such an outcome. The Bank of England has already launched a stress test aimed at mapping links between private credit and the banking system.
The planned product would extend Morgan Stanley’s push into the fast-growing private markets business even as strains in the sector become harder to ignore. In March, investors sought to redeem almost 11% of the outstanding units in Morgan Stanley’s North Haven Private Income Fund, forcing the bank to stick to its 5% tender limit and return only about $169 million, or 45.8% of the requests. Morgan Stanley told investors the restriction was designed to avoid selling assets during a period of market dislocation and said credit fundamentals in the portfolio remained broadly stable.
That backdrop has not stopped the broader wealth industry from trying to package private credit for a wider client base. Interval funds and non-traded business development companies have become a favoured route for fund managers seeking to tap affluent individuals who want yields above those available in public fixed income markets. These structures promise periodic liquidity, usually through quarterly repurchase offers, but the assets they hold are often far less liquid than the shares investors buy. When sentiment sours, that mismatch becomes visible very quickly.
Across the market, redemption pressure has intensified. Barings said this week that investors in its $4.9 billion private credit fund sought to redeem 11.3% of shares in the first quarter, with the manager meeting only 44.3% of those requests. Reuters reported that private credit vehicles tracked by Robert A. Stanger returned a record $7.4 billion to investors in the first quarter as of April 2. KKR also limited withdrawals from one of its non-traded funds after repurchase requests rose above its threshold, while other large managers including Apollo, Ares, BlackRock and Morgan Stanley have adhered to similar caps.
Yet the pressure is not uniform. Goldman Sachs disclosed that redemption requests at its private credit fund came in just below its 5% cap in the first quarter, allowing it to meet all withdrawals. The bank said more than 80% of investors in its wider private credit platform were institutional, helping to shield it from the sharper swings hitting vehicles with heavier retail participation. Goldman also said it was seeing more than $10 billion of institutional commitments in documentation and diligence, suggesting some professional investors view the sell-off as an opening rather than a warning sign.
The private credit industry has grown rapidly since banks pulled back from parts of leveraged lending after the global financial crisis. Estimates now place the market at roughly $1.8 trillion to $2 trillion, making it too large for regulators to dismiss yet still small enough, in the view of some officials, to avoid posing an immediate systemic threat. Morgan Stanley has said private credit accounted for about 30% of the US leveraged finance market in 2025, up from 13% a decade earlier. That expansion has brought more retail money into a corner of finance once dominated by institutions.
What has changed is the tone of the debate. Concerns over opaque valuations and underwriting standards were already present after the failures of First Brands and Tricolor. They have since been reinforced by questions over how artificial intelligence could hurt software borrowers, a major client base for direct lenders, by undermining pricing power and business models. Reuters has reported that some private lenders are increasingly allowing stressed borrowers to defer cash interest through payment-in-kind features, a practice that can buy time but can also mask underlying strain.
Officials are watching closely. Federal Reserve Chair Jerome Powell said on March 30 that regulators were monitoring the sector for signs of contagion but did not currently see the makings of a broader systemic event. A day later, Bank of England Governor Andrew Bailey warned that the opacity of private credit could amplify shocks in a manner reminiscent of the confidence problems seen in 2008, even if he stopped short of predicting such an outcome. The Bank of England has already launched a stress test aimed at mapping links between private credit and the banking system.
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