Cliffwater experienced three consecutive quarters of large redemptions, with Q3 seeing 16% of redemption requests; the redemption cap was once again set at 5%.

Cliffwater LLC’s flagship private credit fund again set a 5% redemption cap in the third quarter, after investors had previously requested redemptions of approximately 16% of the fund’s total shares.

According to Bloomberg, the $31 billion Cliffwater Corporate Lending Fund informed shareholders on Thursday that they would ultimately only be able to recover about one-third of the redemption requests. This is roughly the same percentage as the previous quarter, when investors requested to cash out approximately 17%.

The fund stated that it "remains committed to acting in the best interests of shareholders," and noted that investors who filed for cash redemption since the first quarter of this year have now recovered 78% of their invested capital.

"We remain optimistic about the resilience of private credit," Cliffwater CEO Stephen Nesbitt said in a letter.

This fund under Cliffwater is the largest so-called "interval fund" in the $1.8 trillion private lending market. The fund is closely watched by the market because it has helped Cliffwater grow rapidly into an unexpected giant in the direct lending market: the company quickly raises capital and allocates it on a large scale to lending and other funds.

In the first quarter of this year, Cliffwater Fund investors requested redemptions of approximately 14%, of which about half were eventually recovered, at which point the fund set a 7% withdrawal cap. Subsequently, the fund lowered the redemption limit for investors to 5%, aligning with other private credit funds known as "non-traded business development companies" (BDCs).

The largest of its kind—the $77 billion Blackstone Private Credit Fund—disclosed Thursday that it will again cap redemptions at 5% after investors requested to redeem about 10% of their holdings.

The situation with these two funds suggests that while investors who repeatedly filed redemption requests are starting to receive more funds, the overall redemption backlog of approximately $15 billion may remain stable, as new investors are also beginning to seek exits.

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