Stone Ridge Fund Curbs Redemptions; Consumer Loan Stress Spreads

The fund, heavily exposed to consumer and small-business loans including Buy Now, Pay Later (BNPL) debt from platforms like Affirm and personal loans from LendingClub, recently informed investors it would only fulfill 11% of redemption requests. This follows an earlier offer to repurchase a small percentage of shares, highlighting a growing liquidity mismatch in semi-liquid private credit products.

Other managers, such as Cliffwater, are also facing similar redemption challenges. Despite these liquidity concerns, underlying credit performance in the BNPL sector appears relatively stable.

A CFPB study, cited by the Richmond Fed, indicates BNPL dollar originations grew to $43.9 billion in 2023, with charge-off rates at 1.83% in 2023, significantly lower than the 4.19% for credit card loans. While BNPL remains a small segment of overall U.S. consumer credit, the broader private credit market, estimated at $3.5 trillion, faces increasing scrutiny over valuation and liquidity, particularly as investor demand for exits rises.