When You Can’t Get Your Money Back

Morgan Stanley just restricted investor withdrawals. They’re not the only ones. Here’s what’s happening in private credit — and why it matters to you. *

Imagine you’ve invested a significant portion of your savings in a fund. You’ve been told it’s safe, that it pays steady income, that the biggest names on Wall Street are behind it. Then one day you decide you’d like some of that money back. And the fund says: sorry, not right now.

That’s not a hypothetical. It happened yesterday.

On March 11, Morgan Stanley disclosed that its North Haven Private Income Fund — a nearly $8 billion private credit vehicle — capped investor redemptions at 5% of outstanding shares. Investors had asked to withdraw roughly 11%. The fund honored less than half of those requests, returning about $169 million of the roughly $370 million investors wanted back.

If this were an isolated event, it might not warrant much attention. But it’s not isolated. It’s the latest domino in a pattern that should concern anyone who invests — or anyone whose advisor has been pitching private credit as the next great thing.

What Is Private Credit, and Why Should You Care?

Let me back up for a moment, because private credit has become a buzzword without most people understanding what it actually is.

Private credit — also called direct lending — involves funds that make loans directly to companies, bypassing traditional banks. These aren’t publicly traded bonds you can sell on an exchange tomorrow. They’re private loans, often to mid-sized companies, with terms that can stretch five to seven years.

The pitch is seductive: higher yields than you can get in public bond markets. In a world of low interest rates (at least until recently), that pitch attracted enormous amounts of capital. The private credit market has ballooned to roughly $1.8 to $2 trillion in assets.

Here’s the critical thing to understand: the underlying assets are illiquid, but the fund structures often promise investors periodic access to their money. This is the fundamental tension at the heart of what’s unfolding right now.

A Cascade of Locked Doors

Morgan Stanley isn’t the first. Let me walk you through what’s happened in just the last few weeks:

Blue Owl Capital (February): Announced it would no longer honor regular quarterly redemption requests in one of its funds. Instead, investors would receive periodic payouts at the firm’s discretion — essentially IOUs. The stock fell below its original listing price.

BlackRock (March 6): Its $26 billion HPS Corporate Lending Fund received redemption requests totaling 9.3% of net asset value — roughly $1.2 billion. The fund capped payouts at 5%, returning about $620 million and locking the rest. This was the first time this fund had ever breached its redemption threshold.

Blackstone (March 2): Its massive $82 billion BCRED fund faced record withdrawal requests of 7.9% of assets — about $3.8 billion. To its credit, Blackstone honored all requests, but it had to raise its redemption cap and inject $400 million of its own capital (including employee money) to do so.

Cliffwater (Q1 2026): Its $33 billion flagship private credit fund saw investors try to pull a record 14% of shares. The fund limited redemptions to 7%.

Morgan Stanley (March 11): The North Haven Fund capped redemptions at 5%, honoring only 45.8% of requests.

Meanwhile, JPMorgan Chase has quietly written down the value of some loans to private credit funds. Shares of major alternative asset managers — including BlackRock, Apollo, Ares, and KKR — have sold off sharply.

This is not one fund having a bad quarter. This is an industry-wide pattern.

Why Is Everyone Heading for the Exit at Once?

Several forces are converging:

AI anxiety in software lending. Private credit has been a major lender to software and technology companies. Growing fears that artificial intelligence could disrupt these businesses — and weaken their ability to repay loans — have prompted investors to reassess their exposure. About 21% of software-sector loans were recently trading below 80 cents on the dollar, a significant distress signal.

Higher interest rates. While higher rates initially helped floating-rate private credit returns, they’ve also increased borrowing costs for the companies receiving these loans. That means more stress on borrowers and more questions about whether they can keep paying.

Credit quality concerns. Several high-profile borrower failures in late 2025 and early 2026 — including an auto parts supplier and a subprime auto lender — have raised questions about underwriting standards across the industry. A recent UK mortgage lender collapse added fuel to the fire.

Valuation opacity. Unlike public bonds, which are priced daily on an exchange, private credit loans are valued by the very managers who made them. The Department of Justice has warned about “creative” valuation practices. Duke Law Professor Elisabeth de Fontenay has noted that without public markets, it’s difficult to know if lenders are accurately marking their loans.

The Retail Investor Problem

Here’s where I get particularly concerned, and where this connects directly to the people I work with every day.

For decades, private credit was the province of institutional investors — pension funds, endowments, insurance companies. These are sophisticated allocators with long time horizons who understand that when you invest in illiquid assets, you may not be able to access your capital for years.

But in recent years, Wall Street has aggressively marketed private credit to retail and high-net-worth investors. The products have names that sound reassuring. They’re packaged in structures — non-traded BDCs, interval funds, even ETFs — that give the appearance of liquidity. You can request a redemption quarterly! It feels accessible.

Except when it isn’t.

As Morningstar senior analyst Greggory Warren put it, the current situation should serve as a warning about the risks of selling illiquid funds to retail investors. Moody’s has warned that these funds may need to hold more liquid, lower-yielding assets to manage retail outflows — which would erode the very returns that made them attractive in the first place.

The Better Markets policy group has been even more blunt: private credit exists outside the traditional, highly regulated banking system. There is no FDIC insurance. There are no depositor protections. When panic takes hold in illiquid markets, the guardrails that protect you in banking simply don’t exist.

What This Means in Plain English

Let me translate all of this into what I’d say to you if you were sitting across from me:

If you own private credit funds, understand that your ability to access your money may be limited, and could become more limited. The redemption caps you signed up for are being tested — and in some cases, those caps are the only thing standing between orderly management and a fire sale of assets.

If your advisor is pitching private credit to you, ask hard questions. What are the redemption terms? What happens if everyone wants out at once? How are the underlying loans valued, and by whom? What is the fund’s exposure to software and technology lending? Don’t accept “higher yield” as a sufficient answer.

If you’re watching from the sidelines, this is a real-time lesson in the difference between returns and access to your money. A fund can show an attractive return on paper while simultaneously refusing to let you withdraw.

The Case for Simplicity and Transparency

I’ve spent 28 years in this business. What I’ve learned — both from the data and from sitting with people through every kind of market — is that complexity rarely serves the investor. It almost always serves the institution selling the product.

Private credit offers a premium because the assets are illiquid, opaque, and hard to value. That premium is real. But it comes with real risks that are now materializing in real time, and those risks fall disproportionately on individual investors who were told these products were suitable for them.

Evidence-based, broadly diversified, publicly traded portfolios aren’t exciting. They don’t come with impressive pitch decks or promises of exclusive access. But they offer something that private credit cannot guarantee: you can get your money when you need it.

Liquidity is not glamorous. But when markets get stressed and everyone wants out at the same time, liquidity is the only thing that matters.

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A note on perspective: In my yoga practice, we talk about viveka — discernment. The ability to see clearly what is real versus what is projected. Wall Street is exceptional at projection: impressive returns, institutional credibility, the suggestion that you’re getting access to something special. Discernment means looking past the projection to ask simple questions: Can I get my money back? Do I understand what I own? Is the complexity serving me, or someone else?

Those questions have never been more relevant than right now.

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This article is for educational purposes only and does not constitute investment advice. The opinions expressed are those of the author and do not necessarily reflect those of Raymond James Financial Services. Raymond James Financial Services, Inc. does not provide tax or legal advice.