Cliffwater private credit fund caps redemptions again

Cliffwater’s flagship private credit fund has once again restricted quarterly redemptions to 5%, following investors seeking to withdraw roughly 16% of their investments, according to Bloomberg. The $31 billion Cliffwater Corporate Lending Fund informed shareholders they would receive about one-third of the requested amount during the third quarter, as revealed in an investor letter.

This latest demand was similar to the previous quarter, when investors attempted to redeem around 17% of the fund. So far, investors who have requested withdrawals since the first quarter have received about 78% of the capital they sought to redeem. Cliffwater's CEO, Stephen Nesbitt, expressed confidence in private credit's resilience despite the heightened redemption activity.

The fund has achieved an annualized return of 9.23% since its inception in 2019, outperforming leveraged loans and investment-grade bonds over the same period. As the largest interval fund in the $1.8 trillion private credit market, Cliffwater serves as a crucial indicator of investor liquidity demands in the direct lending sector.

The fund rapidly expanded in recent years, deploying capital across direct loans and other private credit vehicles as Cliffwater solidified its position in the asset class. Redemption pressures surged earlier this year, with investors seeking to withdraw about 14% of their holdings in the first quarter, leading Cliffwater to initially permit withdrawals equivalent to 7% of shares outstanding.

The firm subsequently lowered the quarterly redemption limit to 5%, aligning its payout threshold more closely with other non-traded private credit vehicles.