Cliffwater Direct Lending Index - 2nd Quarter, 2023

The Cliffwater Direct Lending Index(CDLI) is an asset-weighted index of 13,000+ directly originated middle market loans totaling $284 billion. The CDLI assists investors to better understand asset class characteristics and to benchmark manager performance.
The CDLI seeks to measure the unlevered, gross of fee performance of U.S. middle market corporate loans, as represented by the asset-weighted performance of the underlying assets of Business Development Companies (BDCs), including both exchange-traded and unlisted BDCs, subject to certain eligibility requirements. The CDLI Total Return Index includes three components: Income Return, Realized Gain/Loss, and Unrealized Gain/Loss.
Key takeaways from Q2 2023 are:
1. CDLI produced a strong 2.81% Q2 2023 total return, following up on a strong 2.69% Q1 total return, and driven by continued increases in interest income,
2. An equally strong 9.69% CDLI return over the trailing year and a 9.37% annualized return from CDLI’s 2004 inception has contributed to making private debt today’s fastest growing institutional asset class.
3. Private debt yields are now well into the double-digits with the CDLI yield hitting 12.07% during Q2.
4. Realized credit losses are on the rise in 2023, approaching their long-term historical 1% average after two years (2021 and 2022) of near zero credit losses.
5. CDLI-S, our senior-only debt index, and CDLI-V, our venture-only debt index, returned 2.78% and 3.13%, respectively, for Q2 2023.
6. Aside from the pick-up in realized losses, most other measures of loan stress showed only modest changes.
7. A worsening liquidity environment from reduced M&A activity continues to be noteworthy, as the average effective loan life has continued to increase, reaching 5.26 years on June 30, well above its 3.07-year historical average.