In The Wall Street Journal, Gregory Zuckerman and Peter Rudegeair explain that Stephen Nesbitt, CEO of Cliffwater, is facing a “crisis of faith” among investors in his funds and the private credit industry. You know that’s true because you’ve been reading about the redemptions and troubles of private equity and credit in this ongoing series at YourSurvivalGuy.com.
After redemptions were limited at a number of other private credit firms, Cliffwater’s investors are now facing the same treatment. Zuckerman and Rudegeair explain:
Cliffwater told clients it could handle two years of paying out 5% redemptions without any inflows or asset sales. It said it expects a sufficient number of its underlying loans to mature or turn over each quarter and can access cash using an existing credit facility or by borrowing against its positions in other investment vehicles, according to a communication reviewed by The Wall Street Journal.
Action Line: What happens after two years of 5% redemptions? Is the fund relying on new investors coming in to pay out old investors withdrawing their assets? That sounds like it could be a problematic scenario. Keep your eye on Cliffwater and other private equity and credit firms, and if their products start showing up in your 401(k), perform your due diligence. If you’re looking for a wider array of choices in your retirement account, consider an IRA rollover. When you need help, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
Read the entire series here.
