(Bloomberg) –Morgan Stanley plans to debut an interval fund investing predominantly in private credit, just as retail investment vehicles in the $1.8 trillion market are being hit with record redemption requests.
The North Haven Strategic Credit Fund is expected to include “a wide spectrum of credit strategies” and anticipates allowing redemptions of 5% of outstanding shares every quarter, according to an April 3 filing with the US Securities and Exchange Commission.
“Therefore, shareholders may not be able to sell their shares when and/or in the amount they desire,” Morgan Stanley Investment Management Inc. said in the filing.
The nontraded vehicle enters a challenging market, as the private credit industry is facing its greatest liquidity squeeze to date. Vehicles for retail investors — particularly business development companies — are grappling with a surge in redemption requests amid fears over AI disruption and underlying loan quality.
Managers across the market are capping withdrawals to manage outflows, trapping billions of dollars in investor funds that are unable to exit.
Read More: Trapped in Private Credit, Investors Wait to Pull Out $5 Billion
A representative for Morgan Stanley declined to comment.
While BDCs typically focus mostly direct lending, interval funds often invest in a more diverse set of credit assets. In addition to direct loans, Morgan Stanley will hold private securitized debt, capital solutions, real estate debt and public credit such as high-yield bonds.
In March, JPMorgan Chase & Co. also announced plans to launch an interval fund investing in private credit that would offer 7.5% redemptions each quarter, a rare exception to the industry norm of 5%.
Also undeterred by the wave of redemptions, Oak Hill Advisors is launching an interval fund that will deploy capital across public and private debt.
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