Cliffwater Corporate Lending Fund (CCLFX)

CCLFX reports non-accruals of 0.63%. The public BDC average is 2.7%. FS KKR reports 5.5% — and cut its dividend 25% in Q4 2025. New Mountain Finance sold $477 million in positions to Coller Capital at 94 cents just to get out. Blue Owl halted OBDC II redemptions entirely. These funds hold the same PE-sponsored borrowers, in the same sectors, at the same leverage multiples. The question isn’t whether CCLFX’s portfolio is better. It’s whether it’s 5-10x better. That’s what the non-accrual gap implies. The difference is who’s doing the marking.

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Cash fell from $375 million to $92 million in six months — a 76% decline. That $92 million sat against $6.3 billion in unfunded commitments the fund is contractually obligated to fund. That’s 1.5% coverage.

The organic math, from p.126 of the semi-annual report: purchases -$15 billion, paydowns +$7.6 billion, distributions -$1.4 billion, redemptions -$1.9 billion. Organic cash burn: approximately $8.8 billion annualized. The entire deficit was plugged by new share sales and debt draws. The $3.2 billion credit facility draw, the $500 million Macquarie repo — nine transactions, single day, September 26, 2025 — and $625 million in new notes were all just keeping the lights on. Cash still fell 76%.

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When a fund starts packaging assets and selling them through an investment bank, it’s not “eliminating cash drag.” It’s liquidating. And the remaining $9 billion doesn’t get better because you sold the cleanest billion.

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Swedroe writes: 'CCLFX warehouses loans for other lenders who provide a valuation backstop. That backstop can make the same loan worth more when held in CCLFX.'

Let me translate. When CCLFX marks a loan at 99 cents and a public BDC marks the identical loan at 85, the difference isn’t credit quality. It’s a contractual guarantee from a third party. That’s not a market price. That’s a synthetic mark.

If the backstop counterparty can’t perform under stress — because they’re a fund, a bank, or an insurer experiencing their own problems — the backstop evaporates and the mark collapses to market. This is the counterparty risk dynamic that turned AAA-rated CDO tranches into zero in 2008.