Morgan Stanley initiates SRT tied to $6bn loan portfolio-report

Core Insights - Morgan Stanley is arranging a significant risk transfer (SRT) related to a $6 billion portfolio of loans to private market funds, potentially amounting to $750 million, which is 12.5% of the overall loan portfolio [1][3] - SRTs are mechanisms for banks to secure insurance against loan defaults, often structured as credit-linked notes sold to various institutional investors, allowing banks to free up capital for regulatory purposes [2][3] - The loans involved are subscription lines, which are credit facilities extended to private equity and other private market funds for liquidity management [3] Industry Trends - The global SRT market is forecasted to grow at an average annual rate of 11% over the next two years [3] - Other financial institutions, including JPMorgan Chase, Goldman Sachs, and UBS, are also exploring or finalizing SRTs denominated in dollars [4] - The SRTs typically provide default protection for 5% to 15% of loan values, with potential for investors to earn double-digit returns [2]