Morgan Stanley Direct Lending Fund (NYSE: MSDL) reported a net investment income of $40.5 million ($0.47 per share) for Q1 2026, down from $0.49 per share in the prior quarter. The decline was attributed to recent Federal Reserve rate cuts impacting its floating-rate portfolio. The company maintained a high-quality earnings profile, with a dividend coverage of 104%, paying a regular distribution of $0.45 per share during the quarter.
As of the quarter-end, MSDL’s total portfolio was valued at $3.7 billion, with approximately 94% in first-lien debt, across 227 companies in 36 industries. The fund’s total investment income decreased to $89.1 million from $96.6 million in the previous quarter. Credit performance remained stable, with non-accruals slightly decreasing to 1.5% of the portfolio.
MSDL also initiated operations at its joint venture, Capstone Lending, with plans to scale to $700 million in assets. During Q1, the fund closed 13 first-lien senior secured transactions totaling $50 million. The debt-to-equity ratio rose to 1.22, while the net asset value per share dropped to $19.81 from $20.26, indicating ongoing share repurchases as the company balances its financial commitments.
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