A few charts worth discussing
“In leveraged loans, EBITDA add-backs now reduce reported leverage at issuance by roughly 1.2 turns of leverage. In direct lending, the impact is even larger - about 1.9 turns. In both cases the gap is roughly double what it was in 2015. As a result, the reported new issue debt-to-EBITDA of 4.6x for leveraged loans and 5.0x for direct lending often masks underlying leverage that’s actually 5.9x and 6.9x, respectively.”
“Even after layering in all the make-believe add-backs, leverage in private credit would land the average issuer firmly in the B-/CCC rating bucket. To be clear, this is a $2 trillion asset class with credit metrics on par with B-/CCC high yield bonds, which usually make up less than 20% of the high yield market and have a long-term average annual default rate of 20%-to-25%.”
“The largest wealth builders in history...with the shortest time frame clocking in at 74 years for Northrop.”
Other charts worth pointing out
Business development companies – AUM
MRIs by country
Number of MRI scanners – Canada vs Pennsylvania
Concentration peaks
Tech sector fund flows
Historical annual global equity returns vs. bond returns
Relative weight vs. S&P 500 Index by factor group
BofA Fund Manager Survey – Cash levels have largest monthly increase since COVID
Emerging markets equity allocation
Private Credit’s Investor Exodus Spreads to Consumer Loans
Stone Ridge Asset Management told clients in the fund last week that recent redemption requests were so high that it would honor only 11% of the amount investors wanted back, according to an investor update viewed by The Wall Street Journal.
That suggests that investors’ concerns about private credit are broadening. Unlike other private-credit funds that experienced a flight of investors in recent weeks, Stone Ridge’s fund didn’t hold loans to software makers or other corporate sectors that investors fear will be displaced by advances in artificial intelligence.
The details
The Stone Ridge Alternative Lending Risk Premium Fund buys whole loans and securities backed by loans made by fintech lenders. That includes buy-now-pay-later loans from Affirm, personal loans from LendingClub and Upstart and loans that payments companies like Block and Stripe offer to merchants using their platforms.
LENDX, as the fund is also known, owned $2.4 billion of total assets at the end of November, and $1.6 billion of net assets.
LENDX is structured as an interval fund, meaning it must offer to repurchase at least 5% of shares outstanding each quarter. The shares don’t trade publicly, so investors who want to exit have to submit redemption requests to Stone Ridge during predetermined windows, the most recent of which ended on March 6.
Stone Ridge’s update didn’t include what percentage of overall LENDX shares investors wanted to redeem. Already, the firm offered in February to repurchase as much as 7% of its shares outstanding, with an option to buy back an additional 2% of shares if its offer was oversubscribed.
The context
With scores of investors wanting to cash out of private credit in recent weeks, fund managers have had to grapple with whether to relax their existing redemption limits.
Cliffwater, for instance, is paying out about 50% of redemptions requests it received at the Cliffwater Corporate Lending Fund.
With $31 billion of assets under management at the end of 2025, Stone Ridge is a smaller player in private credit. The firm also manages investments in fine art, energy, reinsurance risk and, through its NYDIG affiliate, bitcoin.
Ross Stevens is the founder of Stone Ridge and chief executive of its parent company. Stevens made headlines in January when he gave a record $100 million gift to the U.S. Olympic & Paralympic Committee that included $200,000 for each athlete competing in the Milan Cortina Games.
This week’s fun finds
On a recent trip to Nelson, BC, Kevin got his hands on some local hot sauces with West African influences. While they weren't the hottest we've ever tried, everyone loved the flavours!
Turing Award Goes to Inventors of Quantum Cryptography
In the mid-1980s, Charles Bennett and Gilles Brassard invented an encryption technology that could theoretically never be broken.
Called quantum cryptography, their technology relied on quantum mechanics, the strange and powerful behavior exhibited by electrons, photons and other very small things.
At the time, their technique was a fascinating but impractical creation. Forty years later, it is poised to become an essential way of protecting the world’s most sensitive information.
