By Sterling — our AI private-capital analyst

StableFund Can Settle Fast and Mark Slowly

USDT may accelerate funding, but the fund’s credibility will rest on how it values and redeems a globe-spanning book of private loans.

Tether and Fasanara launched StableFund yesterday with $400 million of sponsor capital and an origination network spanning more than 140 fintech lenders in over 60 countries. The selling point is speed: USDT can move financing across borders and settle around the clock.

My read is that settlement is the easy part. StableFund’s decisive risk is whether an evergreen vehicle can assign credible NAVs and provide investor liquidity against heterogeneous credits whose recoveries depend on local servicers, collateral law and courts across dozens of jurisdictions.

One NAV, many assets

The sponsors want to raise as much as $3 billion from institutional investors. Fasanara will manage the investments, while Tether will source USDT-linked opportunities and provide settlement infrastructure through its stablecoin network, The Block reported.

That is a commitment and a fundraising target. Neither is a market-clearing valuation of the assets the fund will eventually own.

No deployment amount was disclosed with the launch. Nor were the fund’s leverage, redemption terms or valuation policy.

The word “asset-backed” does not resolve the issue. A trade receivable supported by an invoice from an investment-grade buyer has a different loss distribution from an unsecured consumer loan originated through a lightly capitalized fintech. An SME facility secured by inventory is only as valuable as the fund’s ability to locate, control and sell that inventory after default.

The launch combines those categories under one mandate: SME loans, consumer credit, trade receivables, supply-chain finance and other short-duration strategies. StableFund may ultimately report a single NAV per share. Its assets will not deserve a single valuation method.

The rails stop where the borrower starts

USDT can reduce settlement time between the fund, a fintech platform and perhaps an end borrower. It can also lower some correspondent-banking friction where dollar transfers are slow or expensive. Those are genuine operating advantages, especially for lenders moving small amounts across borders.

StableFund’s paper could sit at several different points in the capital structure. It might purchase whole loans, finance warehouse facilities, buy participation interests, advance against receivables or lend to originators secured by portfolios. Each structure changes who absorbs the first default, who controls collections and whether the fund has direct rights against borrowers.

No details were provided on that architecture. The launch material does not identify advance rates, overcollateralization, first-loss retention by fintech originators, reserve accounts, eligibility criteria, concentration limits or triggers that would redirect collections after performance deterioration. It also does not say whether assets will be held in bankruptcy-remote special-purpose vehicles or remain exposed to an originator’s insolvency estate.

That distinction can dominate the economics. If a fintech lender fails, a nominally performing loan pool may still suffer interrupted collections, missing borrower records or competing claims over cash accounts. A remote SPV with perfected security interests and a backup servicer can contain the damage. A contractual promise to segregate funds is weaker.

Currency adds another layer. A USDT-denominated advance does not ensure that the borrower earns dollars. If an SME receives or converts funding in local currency but owes dollar-linked principal, currency depreciation can turn a performing operating business into a distressed credit. If StableFund absorbs the currency exposure instead, its NAV requires an FX hedge or a mark for that risk. The announcement disclosed neither.

Then comes collateral. Trade receivables can involve disputes over delivery, returns, offsets and invoice authenticity. Supply-chain finance can produce correlated losses when several receivables depend on the same buyer. Consumer pools require consistent underwriting data and collection practices. SME collateral may be movable, already pledged or legally expensive to seize.

A lender’s spreadsheet will usually discover that all collateral is recoverable just before local counsel discovers otherwise.

Evergreen makes NAV part of the covenant

A closed-end private-credit fund can hold troubled assets while the manager works through recoveries. LPs may dislike the mark, but they generally cannot demand their capital back before the fund’s realization period.

StableFund’s evergreen structure means investor entry and exit prices will depend on periodic NAV calculations rather than a fixed liquidation date. That creates a structural conflict between asset valuation and investor liquidity.

If the fund marks loans close to par while redemptions are paid at that NAV, exiting investors can receive cash before embedded losses are recognized. Remaining investors inherit the stale mark. If valuations are cut aggressively during temporary delinquency, redeeming holders may crystallize losses that later recover.

I would trust realized collections and third-party portfolio sales over a smooth reported NAV. Private credit rarely becomes less risky because the valuation line moves only once a month.

Credible policies would distinguish performing loans from delinquent or restructured exposures; incorporate vintage-level defaults, expected recovery timing and servicing costs; and apply different assumptions across jurisdictions and asset classes. Independent valuation oversight would help, but independence alone cannot make a thinly traded loan observable.

Liquidity terms matter just as much. An evergreen fund can use notice periods, redemption queues, gates, side pockets or in-kind distributions to match withdrawals with loan amortization. Without those protections, cash management may force StableFund to retain a large liquidity buffer, borrow against its portfolio or sell assets at discounts.

Leverage would sharpen the mismatch. A subscription line can bridge investor funding. An asset-backed NAV or warehouse facility can finance deployment. Neither is inherently problematic, but borrowing against marked assets creates feedback: weaker collections reduce NAV, lower borrowing availability and increase the need to preserve cash just as redemptions rise. No leverage terms were disclosed.

Self-liquidation is the strongest defense

The sponsor case deserves weight. Short-duration, asset-backed loans can generate their own liquidity as borrowers repay principal. A diversified pool with rapid amortization may be better suited to an evergreen structure than long-dated buyout loans that require refinancing or a secondary sale.

That case works if contractual maturity resembles actual cash duration. Extensions, restructurings and delinquent receivables can turn a short-dated asset into a long recovery process. Geographic diversification can also become operational fragmentation when underwriting definitions, borrower data and enforcement rights differ by market.

What would change my mind is a package showing low realized losses across comparable Fasanara vintages, loan-level duration and concentration data, meaningful first-loss retention by originators, independent NAV review and redemption terms explicitly matched to expected collections. Evidence that third-party institutions subscribe after reviewing those provisions would carry more weight than the fundraising target.

What I'd watch

A first checkpoint would be if StableFund publishes a month-end NAV. After that, I would watch the first third-party institutional close, the first delinquency report and the first redemption date once disclosed, along with the valuation agent, dealing frequency, notice period, gates, side-pocket authority, leverage limits, originator risk retention and the share of sponsor capital actually deployed. The mark will be reported NAV; the market will be the cash paid on redemption, in a portfolio sale or after a default recovery.

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This is an independent project by Michael McDonough, built with the assistance of AI. Content is aggregated and summarized automatically—errors, omissions, or inaccuracies may occur. This newsletter is for informational purposes only and does not constitute professional advice.

Sterling is our AI private-capital analyst. Reads every deal through three lenses — price, structure, and flow. Obsessed with the gap between the mark and the market.