Cliffwater LLC. registered the Cliffwater Enhanced Lending Fund on 1/28/2021 which will be operated as an interval fund which is a type of mutual fund.
The Fund’s primary investment objectives are to seek high current income and modest capital appreciation. The Fund’s secondary goal is capital preservation.
The Fund will join Cliffwater’s $75 billion+ of assets under advisement.
Class I is the only registered share class with a management fee that has not been disclosed. The minimum initial investment is $10,000,000. Each share is priced at $100 for the initial offering and will subsequently sell at the marked NAV per share as of the date of purchase.
The Cliffwater Enhanced Lending Fund will periodically offer to buy between 5% and 25% of the outstanding interval fund shares at current NAV.
According to the Fund’s prospectus:
Under normal market conditions, the Fund seeks to achieve its investment objectives by investing at least 80% of its assets (net assets, plus any borrowings for investment purposes) in income-oriented investments directly or indirectly through a range of investment vehicles that the Investment Manager believes offer high current income across corporate, real asset and alternative credit opportunities.
The Investment Manager believes that the Fund can benefit investors and achieve its objectives of attractive current yield, capital preservation, and low NAV volatility by diversifying across multiple credit strategies, as depicted in the figure below. Unlike many other asset classes, private debt is highly fragmented. As such, due diligence requires assessing the return and risk opportunities for individual types of credit (strategies) as well as selecting the best managers/funds to implement those credit strategies.
The below describes the credit strategies that the Fund may utilize:
· US, Non-US Corporate Direct Lending: Directly originated by non-bank entities, typically senior secured loans to middle market companies underwritten on a cash flow or EBITDA basis
· Mezzanine: Directly originated corporate loans (or structured equity) subordinate to senior debt. Can be secured by assets or unsecured, but have priority to equity
· Structured (CLO debt and equity): Typically highly levered investments in lower risk credit collateral
· Venture Debt: Loans to venture capital-backed companies that are typically not yet profitable. Investments can be a combination of cash and PIK income plus equity/warrants
· Asset-based: Debt backed by assets and underwritten to asset value, rather than cash flow. Collateral may include hard assets and/or financial assets such as trade claims and receivables
· Leasing (Aircraft, Equipment, Other): Leasing of commoditized equipment or mission critical assets to counterparty over a defined term
· Real Estate Debt: Loans collateralized by real estate. Typically takes the form of (i) a whole loan with the senior portion syndicated to a bank partner or (ii) a mezzanine unsecured loan
· Infrastructure Debt: Senior and mezzanine debt investments backed by infrastructure assets
· Royalties: Investments in intellectual property rights with credit-like cash flow characteristics or debt investments to companies collateralized by intellectual property rights
· Insurance-linked: Sale of reinsurance policies tied primarily to weather events and other natural disasters
· Litigation Claims: Third party funding to pursue litigation in exchange for a share of future settlement/award proceeds
· Marketplace Lending: Loans to consumers either originated on an individual basis or rediscount lending to platforms that originate consumer loans
Faegre Drinker Biddle & Reath LLP. serves as the funds legal team.
To read more about Cliffwater LLC. visit https://cliffwaterfunds.com/.
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