What is the CDLI? Cliffwater Direct Lending Index 3Q2022

Stephen Nesbitt provides an overview of the Cliffwater Direct Lending Index ("CDLI"), an asset-weighted index of 11,884 directly originated middle market loans totaling $264 billion. The CDLI assists investors to better understand asset class characteristics and to benchmark manager performance, serving as a proxy for private debt, historically averaging a positive return when bonds have negative returns.
The CDLI seeks to measure the unlevered, gross of fees performance of U.S. middle market corporate loans, as represented by the underlying assets of Business Development Companies (“BDCs”), including both exchange-traded and unlisted BDCs, subject to certain Eligibility Criteria. The CDLI is an asset-weighted index that is calculated on a quarterly basis using financial statements and other information contained in the U.S. Securities and Exchange Commission (“SEC”) filings of all eligible BDCs.
Looking ahead and based upon three past recession/slowdown periods for which CDLI data is available, a possible 2023 recession of average (one sigma) dimensions would produce realized losses in the 2-3% range, but would likely be fully offset by current and future credit spread expansion. As in the past downturns, we would expect the CDLI to perform well in comparison to most other asset classes.
Further reading on Private Debt: www.cliffwater...
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Steve is Chief Executive Officer and Chief Investment Officer of Cliffwater and is primarily responsible for the day-to-day management of Cliffwater Corporate Lending Fund (CCLFX) and the Cliffwater Enhanced Lending Fund (CELFX), an SEC registered credit interval fund focused on the US corporate middle market.
Steve is recognized for a broad range of investment research. His papers have appeared in the Financial Analysts Journal, The Journal of Portfolio Management, The Journal of Applied Corporate Finance, and The Journal of Alternative Investments. His private debt research led to the creation of the Cliffwater BDC Index, measuring historical BDC performance, and the Cliffwater Direct Lending Index, measuring historical performance for direct middle market loans. Steve authored the book, Private Debt: Opportunities in Corporate Direct Lending, Wiley Finance (2019) which provides the analytical and empirical underpinnings of the private debt market.
This is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve.
Statements that are nonfactual in nature, including opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice. The opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice. Unless otherwise indicated, dates indicated by the name of a month and a year are end of month.