US private credit crisis spreads on all fronts… Fintech-invested private credit fund also limits redemptions

Stonridge private credit invests in fintech firms such as Affirm and Block

As redemption requests surged, it says it will "pay only 11%"

Collapse of confidence in private credit spreads broadly

The investor exodus that began in the private credit market is spreading into consumer and small-business lending. Private credit refers to a market in which asset managers and other non-bank lenders provide financing directly to companies or individuals, or invest in assets backed by loans.

With redemption limits now hitting funds that invest in consumer and merchant loans originated by fintech companies such as Affirm and Block, liquidity concerns across the market appear to be intensifying.

According to The Wall Street Journal (WSJ) on the 18th (local time), Stonridge Asset Management said in a recent notice to investors that, as redemption requests surged, it would pay out only 11% of the amounts investors requested. This means a significant number of investors are unable to withdraw their money when they want.

The case shows that investor concerns about the private credit market are spreading beyond a specific asset class and into the consumer-loan segment.

The fund at the center of the issue, the 'Stonridge Alternative Lending Risk Premium Fund (LENDX),' is a private credit fund that invests in loans issued by fintech companies and securities backed by those loans.

The structure works as follows. First, fintech firms such as Affirm, LendingClub and Upstart extend loans to individuals or small merchants. Those loan receivables are then pooled into assets, which the fund either buys directly or invests in securities issued against them. Investors contribute capital to the fund and receive distributions in the form of interest income generated by the loans.

The fund also invests in Affirm’s BNPL (buy now, pay later) loans. BNPL is a financial service that allows consumers to purchase goods first and pay later in installments, and it can face a higher delinquency risk when the economy slows. The portfolio also includes personal loans from LendingClub and Upstart, as well as loans that Block and Stripe provided to merchants on their platforms. As of November last year, LENDX had total assets of $2.4 billion and net assets of $1.6 billion.

The fund is run under an 'interval fund' structure. Unlike typical open-end mutual funds that allow investors to redeem at any time, interval funds are closed-end in structure and allow redemptions only at set intervals and up to a certain percentage.

Accordingly, the fund can redeem only a minimum of 5% of its shares each quarter. If investors’ redemption requests exceed that cap, payouts are made on a pro rata basis.

In February, Stonridge offered to redeem up to 7% of total shares and also set up an option to buy an additional 2% if demand surged. This time, however, redemption requests far exceeded those levels, limiting the payout ratio to around 11%.

Across the private credit market, investor demands to pull money out are rising rapidly. As a result, managers are weighing whether to keep existing redemption gates in place or ease them.

Cliffwater’s corporate loan fund has also been paying out only about 50% of investor redemption requests, as similar cases of redemption limits continue to emerge.

What makes this case particularly noteworthy is that the fund is facing redemption pressure even though it invests in consumer-loan assets rather than loans to software companies expected to be hit by the spread of artificial intelligence (AI).

This suggests investor confidence may be wobbling across the private credit market as a whole, beyond risks tied to a specific industry.

Stonridge is a mid-sized manager overseeing about $31 billion in assets as of the end of 2025. It invests in a range of alternative assets, including art, energy and reinsurance risk, and it also operates bitcoin-related businesses through its subsidiary NYDIG.

The market views the episode not as a simple, isolated fund issue, but as a case exposing the fragility of private credit structures that invest in illiquid loan assets while promising a certain level of redemptions.

In particular, if market turmoil intensifies, investor redemption demands could surge, and because funds are structured in ways that make it difficult to quickly convert these assets into cash, repeated redemption limits are being flagged as a key risk.

New York = Correspondent Park Shin-young nyusos@hankyung.com