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Private credit lender Cliffwater limited redemptions from its marquee $33bn fund in the first quarter after withdrawal requests surged to 14 per cent of its shares, in the latest sign of investor unease with the sector.
The Cliffwater Corporate Lending Fund agreed to honour roughly half of the redemption requests it received, approving repurchases of 7 per cent of the fund’s shares, according to two people familiar with the matter.
The money manager had offered to buy back 5 per cent of shares in the quarter, but like other funds is allowed to increase withdrawals by an extra 2 percentage points by the Securities and Exchange Commission.
The exodus highlights the risks facing scores of new semi-liquid funds, which were pitched to investors as a way to invest in private credit but only provide occasional opportunities to sell as the underlying assets rarely trade.
Hours after Cliffwater capped redemptions, Morgan Stanley notified investors in its $7.6bn North Haven Private Income Fund that it had also limited withdrawals. Morgan Stanley said redemption requests had jumped to 10.9 per cent in the first quarter and that it would fulfil 45.8 per cent of those requests.
Cliffwater has been one of the fastest-growing private credit investment shops, targeting retail investors and wealthy individuals whose money is managed by independent brokers. Its flagship fund, known by the ticker CCLFX, has been the envy of more established Wall Street investment firms as it raked in capital.
The firm last year raised $16.5bn from wealthy investors, neck and neck with industry giant KKR and outpacing Ares Management, Blue Owl, Apollo Global Management and BlackRock’s HPS Investment Partners, according to investment bank RA Stanger.
But that has exposed the firm more acutely to the vagaries of retail investors, who have raced to redeem from funds in the aftermath of a handful of corporate defaults and writedowns at publicly traded investment vehicles that own private credit loans.
Cliffwater’s decision to limit outflows to 7 per cent in a quarter comes days after HPS capped redemptions at its flagship vehicle for high-net-worth clients to 5 per cent.
The largest investment groups have internally been debating whether to honour redemptions when they breach the 5 per cent threshold.
While fulfilling higher redemptions has been viewed as one way to bolster the confidence investors have in private credit and individual fund’s access to liquidity, some industry executives fear it creates expectations that funds can be fully withdrawn in periods of stress. They also caution that it can increase a fund’s leverage if the outflows are funded with debt.
Blackstone earlier this month agreed to pay out all investors who sought to redeem from its $82bn private credit fund, known as Bcred, as redemption requests hit 7.9 per cent of its net assets. Blue Owl and Ares both met higher redemption requests at their non-traded private credit funds in the fourth quarter, although Blue Owl permanently limited redemptions at another of its funds this year.
Cliffwater is also in the process of raising $1bn for the fund through the sale of a portfolio of loans, according to people briefed on the matter. One person noted this was to manage the make-up of the portfolio and not to meet redemptions.
The fund also expects to draw in as much as $3bn of new commitments in the quarter, helping offset the outflows, the second person added.
In a letter to investors in the fund, reviewed by the FT, Cliffwater said it had generated an 8.9 per cent return in 2025 and had “conservative net leverage of 0.23x, about one-quarter of the levels found in most private debt vehicles”.
It added that the fund had a “historical track record of near zero per cent in realised losses”.
