FinTech Loan Fund Limits Withdrawals as Investors Exit Private Credit

Stone Ridge Asset Management told clients in one of its funds last week that it would pay investors only 11% of the amount they requested to cash out because recent redemption requests were so high, the Wall Street Journal reported Wednesday (March 18), citing an investor update.

The Stone Ridge Alternative Lending Risk Premium Fund holds consumer and small business loans made by Affirm, LendingClub, Upstart, Block, Stripe and other FinTech companies, according to the report.

Stone Ridge Asset Management did not immediately reply to PYMNTS’ request for comment.

The WSJ reported that the nature of this fund suggests that investors’ concerns about private credit are broader than previously thought, because it does not hold loans to software companies, which investors worry may be pressured by artificial intelligence.

Scores of investors have attempted to cash out of private credit in recent weeks, leading fund managers to reconsider their existing redemption limits, according to the report.

This report came on the same day that the Financial Times reported that Bank of America is offering clients a basket of 17 European financial stocks that allows them to bet against companies the bank said are among the “most exposed to private credit shocks.”

The bank told clients that these stocks had 30% “downside risk” compared with their U.S. peers because their shares have not fallen as much.

The FT reported that U.S. private capital groups Blue Owl and Blackstone have lost 40% and 27% of their market value, respectively, since the beginning of the year, in part because of investors’ worries about private credit and software.

PYMNTS reported March 5 that banks, regulators and investors are taking a closer look at the risks embedded within private credit as that lending class expands and becomes a fixture of modern capital markets.

Questions are mounting about transparency and systemic exposure, particularly as large banks disclose new details about their lending relationships with nonbank financial institutions, according to the report.

It was reported in December that private credit has exploded into the “alternative consumer lending” landscape, helping fund loans from FinTech firms to consumers, and that the amount of lending supported by such funding could grow from less than $10 billion in 2024 to close to $140 billion globally over the next few years.