Private credit crisis: Cliffwater faces 14% redemption requests as investor confidence falters
Apr 2, 2026
Key Points
- Cliffwater faces redemption requests totaling 14% of assets but can only pay out 5% quarterly, exposing liquidity strain at the $50 billion private credit manager.
- Investor skepticism over private credit's risk-return trade-off intensifies as JPMorgan's Jamie Dimon and others question whether returns justify the risks of illiquid loan portfolios.
- Blue Owl also capped redemptions at 5% after receiving 21% in requests, signaling a broader crisis of confidence in the private credit industry's liquidity promises.
Summary
Cliffwater, the $50 billion private credit asset manager founded by Steve Nesbitt, is under acute stress. The firm received redemption requests totaling 14% of its assets in February and capped payouts at its standard 5% quarterly limit, a sign of wavering investor confidence in a fund marketed on liquidity and stability.
Cliffwater's Corporate Lending Fund (CCLFX) launched in 2019 with Blake and Phil Hasbrook as co-managers. It offered daily net asset valuations and quarterly redemptions of up to 5%. By February, the fund held roughly $33 billion in net assets and had generated $375 million in fees over its first 18 months. The firm manages a portfolio of approximately 4,100 underlying loans with a 54-person research team.
Nesbitt spent 25 years at Wilshire Associates advising pension funds before launching Cliffwater in 2004. He built a reputation for restraint and client-focused advising, a sharp contrast to the outsized egos that dominate private equity. As banks retreated from lending to riskier borrowers after 2008, Nesbitt became a vocal advocate for private credit. The firm published research, launched an index tracking private credit performance, and wrote books on the sector. When Nesbitt shifted to managing money, Cliffwater marketed to wealthy individuals through independent financial advisers, positioning itself as offering hedge-fund-like returns with minimal volatility and lower fees than competitors.
That positioning is now under strain. JPMorgan CEO Jamie Dimon warned that private credit returns do not adequately compensate for growing risks and used a cockroach analogy to flag looming defaults. Nesbitt countered that there were no cockroaches in private debt. Others questioned Cliffwater's claims of hedge-fund returns with minimal risk, citing the fact that private loans rarely trade hands and therefore lack the volatility metrics funds typically reference to justify low risk profiles.
The redemption surge suggests investors are no longer convinced by those assurances. Blue Owl, another major private credit manager, also capped redemptions at 5% after receiving 21% in requests during the first quarter. Nesbitt's ability to manage through this liquidity crunch will test both his fund and the broader private credit industry's credibility with retail and institutional clients.