Cliffwater’s $33 Billion Private Credit Fund to See 7%-Plus Redemptions
TL;DR
Cliffwater's $33 billion private credit fund faces over 7% redemption requests, potentially exceeding its 5% quarterly repurchase limit. This reflects broader investor concerns in the private credit market, with other firms like BlackRock also capping withdrawals.
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Cliffwater LLC is facing redemption requests in excess of 7% from its flagship private credit fund, according to people with knowledge of the matter.
The $33 billion Cliffwater Corporate Lending Fund is structured as an interval fund, requiring it to repurchase up to 5% of its shares each quarter if investor requests meet that threshold. If redemptions exceed 5%, Cliffwater has discretion to repurchase as much as 7% of outstanding shares.
Founded by Stephen Nesbitt, Cliffwater is the latest firm in the $1.8 trillion private credit market to see an investor exodus over concerns about loan quality and exposure to software companies that could be disrupted by advancements in artificial intelligence. The fund’s tender window is set to close Tuesday, and the firm hasn’t yet decided whether to limit redemptions at the 5% or 7% mark, said the people, who asked not to be named discussing non-public information.
A representative for Cliffwater declined to comment.
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Last week BlackRock Inc. capped withdrawals from its HPS Corporate Lending Fund at 5% after investors sought to cash in nearly double that amount, the first major instance of a private credit manager limiting redemptions on a perpetual vehicle since the recent market turmoil began.
In contrast, just days earlier Blackstone Inc. allowed investors to redeem a record 7.9% of shares from its flagship fund, known as BCRED, after tapping roughly $150 million from senior leaders who contributed their own capital, along with about $250 million from the firm itself to offset the outflows.
Read More: Private Credit Gate-Crashers Are Forcing Funds Into Brutal Spot
Private credit managers have aggressively courted retail investors in recent years. Cliffwater partnered with BetaShares Holdings, an exchange-traded fund giant, to give Australians exposure to private credit loans.
Cliffwater has pushed back against concerns over the quality of the market’s underlying assets, arguing that sentiment is driving the selloff in private credit funds more so than fundamentals.
In November the Cliffwater fund was given a credit grade of A by S&P Global Ratings, which cited its high diversification and relatively low leverage compared with most private debt vehicles. The report also noted its strong asset quality and cash flow.