Setting the Record Straight

Correcting the Misinformation on CCLFX

I have been getting lots of questions from investors and readers of my articles about the risks of private credit. To help a broader audience I thought I would address lots of the misinformation from the media and even analysts. I hope the following will set the record straight.

There has been much misinformation and incorrect analysis circulating regarding private credit and, specifically, CCLFX—Cliffwater’s Corporate Lending Fund. A recent piece of analysis contains a series of fundamental misunderstandings, selective data pulls, and outright errors. Since I received questions about it from several people, I thought it would be helpful to a broader audience to write a response that addresses these criticisms.

Here is what this analysis got wrong, and why it matters to investors.

1. Realized Investment Losses: Cherry-Picking a Short Window

Cliffwater has managed CCLFX to a 9.54% net total return since inception—with no net realized losses over the fund’s history. Year-to-date through February 28, 2026, CCLFX has posted a 0.04% realized gain.

This analysis selected a narrow slice of 2025 performance to manufacture a negative narrative. That’s not analysis, it’s cherry picking.

Evaluating any credit fund over a short, hand-selected window is misleading. Cliffwater’s long-term track record speaks for itself.

2. Cash Reserves: A Feature, Not a Bug

CCLFX intentionally maintains minimal cash reserves. Cliffwater manages liquidity through a large revolving credit facility—a deliberate and sophisticated approach to eliminate “cash drag” and avoid the fee penalties that come with holding idle cash.

Some critics observed a reduction in cash holdings and framed it as a red flag. In reality, it reflects the fund operating exactly as it was designed. The fund’s revolving credit line provides ample liquidity without sacrificing returns. This is a well-understood mechanism in institutional credit management—one that this analysis apparently missed.

3. Total Debt: Ignoring the Full Financing Picture

CCLFX is managed to a risk level consistent with capital preservation in down markets. That means maintaining leverage levels well below those typical of BDCs and drawdown funds. When all financing sources are considered together, debt levels have remained consistent quarter-to-quarter.

This analysis isolated a single source of financing and ignored the rest, producing a distorted and incomplete picture of CCLFX’s balance sheet.

Selective accounting is not due diligence. A holistic view of CCLFX’s financing structure tells a very different story. So, let’s take a look at Cliffwater’s approach to liability management—a step this analysis clearly failed to take.

Liquidity & Liability Management: Meeting Redemption Needs

For interval funds like CCLFX, liquidity management is critical. The fund’s robust approach includes:

• More than $14.5 billion in debt commitments raised since inception.

• More than 80 unique financing relationships.

• The largest issuer of US private placement notes in 2022, 2023, 2024 and 2025.

• Over $6 billion in immediately available liquidity, the highest percentage relative to NAV among peers.

4. Redemptions: Misreading Market Sentiment as Fund-Specific Risk

The average quarterly redemption rate for CCLFX is approximately half the stated 5% quarterly minimum required rate. Like all credit funds (and all funds that hold risky assets), redemptions tend to fluctuate with investor sentiment—lower in risk-on environments, higher in risk-off periods.

This analysis compared redemption rates across different market sentiment regimes and drew conclusions specific to CCLFX, a basic analytic error.

There is nothing unusual about CCLFX’s redemption experience. In fact, thanks to its strong emphasis on liquidity management, in the fourth quarter of 2025 Cliffwater was able to meet more than the minimum 5% redemption requirement. The variation highlighted in this analysis reflects broad market dynamics, not any fund-specific concern.

5. Unfunded Commitments: Half the Balance Sheet

Cliffwater carefully balances unfunded commitments — revolvers and delayed draw loans to borrowers — with corresponding contingent assets: revolver facilities and delayed draw loans provided to CCLFX by banks, insurance companies, and others.

Some critics noted the contingent liability. Unfortunately, they failed to mention the contingent asset. This isn’t analysis, it’s omission.

Presenting liabilities without offsetting assets produces an artificially alarming picture. Any first-year finance student understands that balance sheets require both sides.

6. Valuation and NAV Methodology: Disparaging Excellence

CCLFX’s NAV is derived from prices set by independent valuation firms on a quarterly cycle, supplemented by daily, intra-quarter adjustments overseen by the CCLFX Valuation Committee. These adjustments use price discovery from broadly syndicated credit markets to potentially remark loan holdings—an innovative methodology now widely adopted across the semi-liquid permanent capital vehicle space.

On the matter of CCLFX’s auditor, Cohen & Company: some critics dismiss them as a “small regional accounting firm.” That characterization is simply false, and this type of casual disparagement of a respected firm calls into question the credibility of such analysis. Here are the actual facts about Cohen & Company. It is a Cleveland-based IPA 100 firm, with FY2023 net revenue of $153.9 million. Being ranked in the IPA 100 places it solidly in the top tier of mid-sized national firms—well below the Big 4 or major national players like BDO or Grant Thornton, but clearly a significant regional/national presence. The firm has more than 800 professionals across the U.S. and 12 offices in Illinois, Ohio, Maryland, Michigan, New York, Pennsylvania, and Wisconsin, with an international presence in the Cayman Islands and Ireland. In addition, it has been named one of America’s Most Recommended Tax and Accounting Firms by USA TODAY and one of the Best of the Best Firms by INSIDE Public Accounting. It offers assurance, tax, and advisory services, serving privately held companies, public and private investment funds, and Fortune 1000 multinational enterprises. And it has a particularly strong niche in the investment management/financial services space—funds, advisers, and fund service providers—which differentiates it from many generalist regional firms. The bottom line is that Cohen & Company is a well-regarded, upper-tier regional/national firm with a strong reputation—especially in financial services and investment management auditing.

Here’s another complete miss in this analysis. A specific loan holding was highlighted in which CCLFX priced it near-par, contrasting it with a lower valuation in another fund. What was apparently not known—likely because no one ever asked—is that CCLFX warehouses loans for other lenders who provide a valuation backstop. That backstop can make the same loan worth more when held in CCLFX. In other words, the difference in valuation is not a discrepancy. It reflects real structural differences in how the loan is held.

The Fundamental Problem: No Direct Engagement

Cliffwater’s research process always includes extensive engagement with managers and lenders before reaching conclusions. Apparently, this analysis was published without ever speaking to Cliffwater.

That single fact explains all the above errors above. Real due diligence requires dialogue, context, and intellectual honesty—not a drive-by analysis that misreads fund features as flaws.

Investors deserve better. And frankly, so does the market for independent credit analysis.

Larry Swedroe is the author or co-author of 18 books on investing, including his latest Enrich Your Future. He is also a consultant to RIAs as an educator on investment strategies. For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice.