Exclusive: Morgan Stanley And BlackRock Limit Withdrawals—Is Private Credit Gating A Crisis Or Market 'Stabilizer'?

<h1>Exclusive: Morgan Stanley And BlackRock Limit Withdrawals—Is Private Credit Gating A Crisis Or Market 'Stabilizer'?</h1>
<p>The $1.8 trillion private credit market is facing a critical liquidity test as Morgan Stanley and BlackRock Inc. move to restrict investor withdrawals, though industry experts tell Benzinga these “gates” are functioning as a structural “stabilizer” rather than a sign of collapse.</p>
<h2>The Gating Wave Hits Morgan Stanley</h2>
<p>Morgan Stanley became the latest Wall Street giant to curb redemptions after investors sought to withdraw nearly 11% of shares from its North Haven Private Income Fund (PIF).</p>
<p>Adhering to its quarterly limit, the fund fulfilled only 45.8% of those requests. This follows a similar move by BlackRock, which limited withdrawals from its $26 billion HLEND fund after redemption requests hit 9.3% of net asset value.</p>
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<p>While these restrictions have rattled some investors, proponents argue that these measures are necessary. Louis Navellier, CIO of Navellier &amp; Associates, notes that the “Blackrock 5% quarterly redemption limit is written into the Private Credit fund’s charter” specifically to protect long-term value.</p>
<p>Emphasizing the structural reality of the asset class, John Cocke, deputy chief investment officer of credit at Corbin Capital Partners, told Bloomberg that “You cannot create liquidity from an illiquid asset class”.</p>
<h2>JPMorgan Tightens the Grip</h2>
<p>The pressure is also forcing traditional banks to pull back. JPMorgan Chase &amp; Co. has started “restricting lending to loans associated with software companies” in its private credit funds as a precautionary measure.</p>
<p>Additionally, the bank has reportedly “reduced the value of some loans to private credit funds” following a review of how market turmoil—specifically AI’s potential to erode software earnings—is impacting the sector.</p>
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<h2>An ‘Oasis’ Amid Rising Defaults</h2>
<p>Despite the surge in withdrawals, some analysts remain constructive on the U.S. market. Navellier describes the U.S. economy as an “oasis” compared to global peers.</p>
<p>While he acknowledges that default rates are approaching 9% for some funds, he suggests that anticipated Federal Reserve rate cuts will take pressure off variable-rate loans, making a “worst-case” 15% default scenario unlikely.</p>
<h2>The Shift To The ‘Sweet Spot’</h2>
<p>As U.S. financial conditions tighten, capital is “slowly tilting” toward emerging markets. John Murillo, Chief Business Officer of B2BROKER, identifies India as a “sweet spot” for yield and diversification, highlighted by the recent $400 million close of 360 ONE Asset's latest fund.</p>