JPMorgan Chase plans to launch a new fund that invests in private credit, allowing investors to redeem 7.5% of the returns every quarter and potentially offering monthly withdrawal services. Currently, the $1.8 trillion private credit market is facing an unprecedented liquidity crunch.
JPMorgan’s Public and Private Credit Fund (a closed-end fund) stated in its prospectus this week that it currently “expects” to repurchase 7.5% of its shares each quarter. However, the fund is applying to the U.S. Securities and Exchange Commission for an exemption to allow it to repurchase at least 2% of its shares each month.
This move comes at a time when many large private credit managers have set quarterly redemption limits at 5%, trapping billions of dollars that could otherwise have flowed out. Although the design of regular redemption funds allows for redemptions of 5% to 25% per quarter, a commitment to a 7.5% redemption rate is relatively rare, and the possibility of monthly redemptions is even rarer.
In its request to the U.S. Securities and Exchange Commission, JPMorgan Chase stated, “Repurchasing stocks on a monthly basis rather than quarterly has many benefits and is therefore in the public interest and the interest of ordinary shareholders.”
A representative of JPMorgan Chase declined to comment beyond the submitted documents.
According to the prospectus, the new fund plans to invest at least 80% of its capital in credit, including “a significant portion” of private credit and publicly traded loans.
Over the past two years, several private credit companies have launched regular funds, aiming to continue attracting retail investors. Unlike business development companies, these funds need to provide regular liquidity.
JPMorgan Chase CEO Jamie Dimon had raised the alarm late last year that more than one credit institution might have “problems” due to relaxed underwriting standards, which caused a huge stir. Recently, the bank has also restricted lending to some private equity funds by lowering the loan valuations of some of them.
Last year, Dimon also said that the rush into the private credit market might have peaked and that acquiring private credit companies was not his “top priority”. However, he still believed that “some aspects of direct lending are good”, and the Bank of Canada has committed to investing 50 billion US dollars in this area.
