Shares of Morgan Stanley led losses among major US banks on Thursday, falling in tandem with stocks of top asset managers, after the lender limited withdrawals from one of its private credit funds.
Morgan Stanley shares fell by as much as 5%, hitting their lowest intraday level since Oct. 14. Apollo Global Management Inc., KKR & Co Inc. and Ares Management Corp. all fell by at least 3%. The KBW Bank Index slid as much as 2.9%, putting it on track for its sixth straight session of losses.
Morgan Stanley and Cliffwater LLC are the latest money managers to cap redemptions from their multibillion-dollar private credit funds, after investors tried to withdraw far more than allowed.
Private credit funds have grappled with a wave of redemption requests lately as concerns swirl around the quality of their loans — particularly to software firms under threat from artificial intelligence. While most funds had tried to meet investor demands for cash, BlackRock Inc. last week decided to limit withdrawals in a move that other managers have since followed.
"Given banks' interconnectivity and exposure to private credit firms, the negative gating headlines continue to weaken market sentiment for banks," said Bloomberg Intelligence analyst Herman Chan. "While banks' direct lending exposure to private credit is relatively limited, the market is selling first and asking questions later."
The caps are the latest negative catalyst for alternative asset managers and bank shares. So far this year, worries over competitive artificial intelligence tools and services as well as exposure to possible risks in private credit have weighed on shares of lenders, payment providers and asset managers.
Meanwhile, Blue Owl Capital Inc. recently told investors that its sale of $1.4 billion of loans from a trio of its funds didn't contain any backstops or hidden incentives. Shares of the asset manager dropped nearly 5% Thursday before trimming losses. The stock is heavily oversold, according to data compiled by Bloomberg.
The broader market is also trading lower on Thursday, after a renewed oil spike stoked fears that the war in Iran will further crimp energy supplies and fuel inflation. The S&P 500 Index slid about 1.2% as of 10:54 a.m. in New York.
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