Wall Street Credit Fund "Run on the Bank" Continues: Following Morgan Stanley, Singapore's GIC Also Requests Redemption

The bankruptcy of an auto parts manufacturer is triggering a chain reaction for a credit fund on Wall Street, further evolving into a redemption storm sweeping through top investment institutions. Jefferies is facing ongoing withdrawal pressure due to its fund's exposure to the bankrupt company First Brands.

According to media reports on Wednesday citing informed sources, the latest action comes from the Singapore sovereign wealth fund GIC, which has been negotiating with Jefferies in recent weeks and has requested to redeem part of its funds from Jefferies' Point Bonita Capital fund. This move adds new variables to the escalating "run on the bank."

Prior to this, other investors, including BlackRock, Morgan Stanley's asset management division, and the Texas Treasury Safekeeping Trust Company, have also sought redemptions. According to a previous article by Jianwen, Morgan Stanley has officially initiated the withdrawal process. The "vote with their feet" actions of a series of top institutions are continuously applying pressure on the fund.

In the face of concentrated redemptions from investors, fund manager Jefferies stated that redemption requests will take effect on December 31, and funds will be returned to investors through four quarterly payments in a pro-rata manner, with the final payment expected to be completed by October 2026. This arrangement indicates that investors cannot withdraw immediately, and the exit of funds will be extended to nearly two years.

The Redemption Storm Intensifies, Institutional Investors "Vote with Their Feet"

At the center of this storm is the Point Bonita Capital fund managed by Jefferies' asset management company Leucadia Asset Management. The fund has a size of approximately $3 billion and focuses on trade financing. However, about a quarter of its portfolio is related to accounts receivable from the now-bankrupt auto parts manufacturer First Brands Group.

The direct trigger for this wave of redemptions is the sudden bankruptcy of the unlisted auto parts manufacturer First Brands Group and the complex debt and off-balance-sheet financing issues it exposed, totaling nearly $12 billion. The high-risk exposure to a single company caused First Brands' bankruptcy to quickly transmit to the Point Bonita Capital fund, raising investor alertness.

As the fund's risks become apparent, heavyweight institutional investors are choosing to exit. According to informed sources, the Singapore sovereign wealth fund GIC is the latest institution to request a redemption.

Prior to this, media reports indicated that other top institutions on Wall Street have also taken action. Morgan Stanley's asset management division, the world's largest asset management company BlackRock, and the Texas Treasury Safekeeping Trust Company have all submitted redemption requests. The collective actions of these institutions clearly indicate market concerns about the fund's future performance.

Fund Manager Responds to Redemption Arrangements

As the fund manager, Jefferies issued a statement on Sunday evening in response to the matter. The statement indicated that after discovering the issues with First Brands, its subsidiary Leucadia directly communicated with the fund investors of Point Bonita and agreed that it was a reasonable choice for investors to submit redemption requests, aiming to "provide them with maximum flexibility."

At the same time, Jefferies defended its business relationship with First Brands. The bank stated that it has been providing advisory services for First Brands' financing in the leveraged loan market for over a decade but was unaware of any fraudulent activities by the company. Jefferies emphasized that its own investment exposure to accounts receivable related to First Brands in the fund is small, amounting to $43 million, or 5.9%.

According to the redemption details disclosed by Jefferies, all redemption requests will take effect on December 31. At that time, the fund will return funds to investors in four quarterly payments, with the final payment expected to be made in October 2026. This timeline means that although investors have expressed a desire to exit, liquidity will be strictly managed to avoid forced low-price asset sales, thereby allowing time for an orderly liquidation of the fund.