Private credit exodus forces caps at Cliffwater, Morgan Stanley

Published Thu, Mar 12, 2026 · 09:31 AM

[NEW YORK] Morgan Stanley and Cliffwater capped withdrawals from their multibillion-dollar private credit funds after investors sought to redeem vastly more than the vehicles allow.

Cliffwater’s US$33 billion flagship private credit vehicle limited redemptions to 7 per cent of shares in the first quarter, after investors sought to pull a record 14 per cent. Morgan Stanley’s North Haven Private Income Fund, which has almost US$8 billion in assets, returned around US$169 million, or less than half of investors’ tender requests, after capping redemptions at 5 per cent of shares.

The moves are among the starkest examples yet of private credit funds grappling with a wave of redemption requests amid growing concerns over the quality of their loans, particularly to software companies under threat from artificial intelligence.

While most funds had sought to meet investor demands for cash, BlackRock last week decided to limit withdrawals, a move that other managers have since followed.

Representatives for Cliffwater and Morgan Stanley declined to comment.

Private credit funds focused on retail investors are typically required to offer quarterly repurchases of their shares.

Cliffwater said that a payout of 7 per cent was a “regulatory maximum” in a Wednesday letter signed by founder and chief executive officer Stephen Nesbitt and seen by Bloomberg News. A spokesperson for the firm confirmed the contents of the letter.

Managers of the Cliffwater Corporate Lending Fund had been debating whether to cap redemptions at 5 or 7 per cent as it anticipated redemptions to exceed the higher mark, Bloomberg News previously reported.

In the letter Nesbitt told investors the Cliffwater fund’s performance “remains strong”. He highlighted an annualised return of about 9.4 per cent since June 2019 and a “historical track record of near zero per cent in realised losses”. The fund’s liquidity as a percentage of net asset value is 21 per cent, the letter said.

The fund honoured 7 per cent of withdrawals during the Covid pandemic and agreed last quarter to redeem 5.3 per cent of shares, Nesbitt told investors.

In its own letter to clients, Morgan Stanley pointed to challenges facing the private credit industry broadly, including a contraction in asset yields and uncertainty around the M&A environment. Still, it expects that “some of these pressures may soon ease”.

North Haven had over US$2.2 billion of liquidity available as at Jan 31, Morgan Stanley said in the letter, while noting a 8.9 per cent annualised net return over three years for the fund.

“The structure of the company was intentionally designed to balance the desire to offer investors the opportunity for periodic liquidity with the less liquid characteristics of the private assets in which the company invests,” Morgan Stanley wrote. BLOOMBERG