Cliffwater Seeks Buyer for $1 Billion Private Credit Portfolio in Secondary Market Move
Cliffwater, a leading investment advisor, is testing the private credit secondaries market with a significant portfolio sale aimed at optimizing one of its flagship funds, according to sources familiar with the matter. The firm is seeking a buyer for approximately $1 billion in net asset value (NAV) of first-lien loans, part of a broader strategy to manage the risk and concentration of its $10 billion Cliffwater Corporate Lending Fund (CCLFX).
The transaction, which has been shopped to potential buyers for several months, involves moving the assets into a dedicated investment vehicle. Cliffwater's goal is for a buyer to capitalize this vehicle with 2:1 leverage. Following the sale, CCLFX would retain roughly $9 billion in exposure to the underlying assets. Evercore has been retained as the advisor on the deal.
This move is not Cliffwater's first foray into the secondaries market for portfolio management purposes. However, it underscores a notable evolution in the private credit landscape. General partners (GPs) of non-traded business development companies (BDCs) and evergreen funds are increasingly turning to GP-led secondary transactions as a tool for active portfolio management—a relatively novel application for this asset class.
Industry Trend Gains Momentum
Cliffwater's deal is part of a wave of similar activity. Recently, New Mountain Capital closed a nearly $500 million secondary deal to reconfigure its BDC portfolio, reducing exposure to several large positions. Blue Owl Capital executed a $1.4 billion transaction to expedite capital returns to investors in a legacy fund. In a telling example of sector-specific risk management, Goldman Sachs BDC sold off its position in an eight-year-old software loan in Q4, citing "anticipated headwinds and AI disruption risk within the industry" on an earnings call.
While the private credit secondaries market has expanded dramatically, reaching an estimated $20 billion in volume, growth has historically been fueled by continuation vehicles designed to provide liquidity to limited partners. The current trend of BDCs and interval funds using the market for tactical portfolio adjustments represents a distinct and growing niche.
Market Voices
"This is a logical step for managers of semi-liquid vehicles," says Michael Thorne, a portfolio manager at a pension fund. "The secondaries market offers a tool to rebalance without forcing a fire sale in the primary market. It's a sign of the market's maturation."
"It's portfolio management 101, just on a billion-dollar scale," notes Sarah Chen, a credit analyst. "They're trimming exposure to manage concentration risk or recycle capital into newer opportunities. Other funds will likely follow suit."
"Let's call it what it is: a sophisticated risk-offload," argues David Reeves, a vocal hedge fund commentator. "They're packaging a billion dollars of loans and hoping someone else takes the leverage risk. This feels less like strategic management and more like passing the hot potato, especially in this economic climate."
"The innovation here is the use case," observes Priya Sharma, a partner at a secondaries-focused advisory firm. "We're seeing the secondary market's utility expand from pure liquidity solutions to becoming an integral part of ongoing portfolio strategy for evergreen structures. This could significantly deepen the market's role."
Cliffwater and Evercore both declined to comment on the ongoing transaction.
This article is based on original reporting by PitchBook News.