From Q the Raven:

Tomorrow my appearance on Thoughtful Money that I did today will be posted. But now, a sneak peek. My stark prediction on that episode? That there would be a real run on private credit by the end of this week or Monday of next week. And that’s exactly what’s happening.

Morgan Stanley just joined the list of private credit managers limiting withdrawals.

Both Morgan Stanley and Cliffwater LLC capped redemptions in major private credit funds after investors tried to pull far more money than the vehicles allow. Cliffwater’s $33 billion Corporate Lending Fund limited withdrawals to 7% of shares in the first quarter after investors requested about 14%. Morgan Stanley’s $8 billion North Haven Private Income Fund capped withdrawals at 5%, returning roughly $169 million — less than half of what investors asked for.

The move comes just days after BlackRock also limited withdrawals from one of its large private credit funds.

As I wrote this morning and have been writing for weeks now, the pressure building in private credit is starting to show up in the exact way many managers were hoping to avoid.

According to Bloomberg, Cliffwater had already been facing redemption requests exceeding 7% in its $33 billion Cliffwater Corporate Lending Fund, one of the largest interval funds in private credit. Because the fund is structured as an interval fund, it is required to repurchase up to 5% of its shares each quarter if investor demand reaches that threshold. Management can increase that amount to 7%, but anything beyond that effectively requires limiting withdrawals.

As I wrote about last week, this is exactly the dynamic many private credit managers have been trying to avoid.

When BlackRock began limiting withdrawals from one of its largest private credit vehicles after redemption requests surged, it highlighted a structural issue in the asset class. The firm’s $26 billion HPS Corporate Lending Fund received redemption requests for roughly 9.3% of outstanding shares but ultimately capped repurchases at 5%, meaning only about $620 million of nearly $1.2 billion in requests were fulfilled.

Private credit managers often frame these limits as a normal liquidity feature designed to match long-term loans with long-term capital. But the reality is simpler: when investors want their money back faster than loans can be repaid, funds have limited options. The alternative is selling loans — often at distressed prices.

Once one large fund begins gating withdrawals, investors across the space start paying closer attention. Some try to exit before similar limits appear elsewhere, which increases redemption pressure on other funds.

Cliffwater’s situation doesn’t necessarily mean a full panic is underway. But it does suggest the stress many assumed was isolated may actually be spreading across a market where assets rarely trade and valuations rely heavily on internal models rather than daily price discovery.

As I’ve said repeatedly over the last month, the cracks in private credit were already forming beneath the surface. When liquidity tightens in a market built on long-duration loans and limited secondary trading, redemption pressure becomes the catalyst that exposes those weaknesses.

Stocks closest to the situation include private credit managers like Apollo Global Management, Blackstone, Ares Management, and Blue Owl Capital, along with regional bank exposure through the SPDR S&P Regional Banking ETF.

For years private credit worked perfectly.

Right up until investors started asking for their money back. Funny how that works.

As Kevin Bacon once exclaimed in a hysterical voice in Animal House “All is Well!!”