Morgan Stanley, one of the key players in financing the artificial-intelligence race, is considering offloading some of its data-center exposure via a so-called significant risk transfer.The bank has held preliminary talks with potential investors about an SRT tied to a portfolio of loans to businesses involved in AI infrastructure, according to people with knowledge of the matter, who asked not to be identified because the information is confidential. SRTs backed by data-center exposure are still a nascent ...

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]