Wealth advisers are warning that investors may face years of delays getting their money out of the Stone Ridge Alternative Lending Risk Premium Fund, which has blocked full withdrawals for 16 straight quarters. The fund, known as LENDX, specializes in consumer and small-business debt investments. Redemption requests have grown more challenging as more investors seek exits, with the fund limiting cash distributions to preserve its illiquid asset base.

In September 2022, LENDX investors received 85% of their requested cash, but that figure dropped to just 12% this month, according to people familiar with the fund. One wealth manager estimates his clients could wait six additional years to recover their full investments. Private-credit funds typically permit up to 5% quarterly redemptions to avoid forced asset sales, but exceeding this threshold triggers prorated payouts and extended waiting periods.

The struggles at LENDX reflect broader industry pressure as loan performance has deteriorated over the past year, particularly among software companies vulnerable to AI disruption. Rising default fears have triggered an exodus of wealthy investors from private-credit vehicles, creating a feedback loop where redemption restrictions intensify as more investors rush to exit simultaneously.

This liquidity crunch signals growing pains for private credit, which attracted massive inflows during the low-interest-rate era but now faces its first major stress test. The LENDX fund's prolonged restrictions could pressure other managers to reconsider redemption terms, potentially reshaping how wealthy investors allocate to alternative assets.