Morgan Stanley Direct Lending Fund reported net investment income of $42.4 million for the quarter ended December 31 2025, translating to earnings of $0.49 per share. The figure represents a modest decline from the $43.7 million ($0.50 per share) posted in the third quarter, indicating a slight compression in earnings momentum.
Total investment income for the quarter was $96.6 million, down from $99.7 million in Q3 2025. The result aligns with analyst consensus estimates of $96.4–$97.3 million, showing the fund met expectations. The dip is largely attributable to lower base rates, which reduced interest income across the portfolio.
Year‑over‑year, the fund’s Q4 2025 net investment income fell 16% to $42.4 million from $50.7 million ($0.57 per share) reported in Q4 2024. The decline reflects the broader normalization of interest rates that has compressed margins for leveraged loan and credit‑enhanced debt vehicles.
In line with the earnings outcome, the fund declared a regular dividend of $0.45 per share for the first quarter of 2026, a $0.05 reduction from the $0.50 per share paid in the previous quarter. The cut is intended to preserve capital in a lower‑rate environment while maintaining a sustainable payout ratio.
Strategically, the fund has launched the Capstone Lending LLC joint venture, expanding origination capacity and reinforcing its market position. The portfolio remains heavily weighted toward first‑lien debt (96% as of December 31 2025), underscoring a focus on senior secured lending. The fund operates in an industry that ranks in the bottom 41% of Zacks’ sector rankings, highlighting the headwinds faced by business‑development companies amid declining rates and tightening credit conditions.
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