Setting the Record Straighter
Larry Swedroe Just Made My Case For Me
On Sunday night, a retired finance author with 18 books and a large retail following published 2,000 words calling my forensic audit of CCLFX — the $33 billion Cliffwater Corporate Lending Fund — “misinformation.” He said I cherry-picked data. He said I don’t understand how interval funds work. He said I never called Cliffwater.
He didn’t call me either.
He also didn’t mention that he personally owns the fund he’s defending, that he’s published ten promotional articles about it in the past year, or that his piece reads like it was drafted from the same talking points Cliffwater sent to clients after the New York Times started asking questions.
His name is Larry Swedroe. His article is called “Setting the Record Straight.” This is what he got wrong, what he accidentally revealed, and why it matters.
Forty-eight hours after he published, Bloomberg reported that investors had just requested 14% of their shares back — nearly three times the redemption gate — making it the largest withdrawal event in the history of the private credit market. The same day, PitchBook reported Cliffwater is selling $1 billion in assets through Evercore.
Larry said there was nothing unusual about the redemptions. The market disagreed.
I. The Part Where He Forgot to Disclose
Larry Swedroe’s only disclosure: “consultant to RIAs as an educator on investment strategies.”
What he didn’t tell you: he is a personal investor in both CCLFX and CELFX. He said so on the White Coat Investor podcast in January 2026 — “I chose to invest with a firm called Cliffwater” — and that he owns “roughly equal amounts of both.” His alternative allocation approaches 60% of his portfolio.
Since March 2025, he has published at least ten separate articles promoting Cliffwater on his Substack. “Why Cliffwater Was My Choice for Private Credit.” “The Sky Isn’t Falling.” A celebratory piece on their S&P ‘A’ rating. A book review of CEO Stephen Nesbitt’s latest. “Private Credit: Separating Facts from Media Hysteria.” And five more. Every one presents Cliffwater as the gold standard.
Exactly one of those articles — the November 2025 S&P rating piece — contains an ownership disclosure, buried at the very bottom: “I am investor in CCLFX and have been almost since inception.”
It appears nowhere else. Not in the piece attacking my work. He knows he should disclose. He chose not to.
II. The Part Where a Hedge Fund Had the Same Idea
Before Swedroe published, a hedge fund called Rubric Capital — $3 billion AUM, founded by David Rosen, a former deputy at Point72 — sent a private letter to their LPs calling CCLFX “a canary in a coal mine” and “the first domino in the bank run we foresee.” They warned of “Enron-like accounting games” across private credit.
The letter was dated February 18 and was private. Reuters broke it on February 26. The New York Times covered it around March 3.
Here’s the timeline that matters: I published “These People Are Not Investors” on February 21 — public, free, on Substack. The CCLFX white paper went live March 2. The viral tweet thread hit March 4 and has crossed a million impressions across the series. Tens of thousands of readers saw my work before any hedge fund’s name was attached to this thesis publicly. I was kinder than David Rosen.
Rubric’s letter hits several of the same points — asset-liability mismatch, redemption risk, the interval fund structure, Cliffwater as a systemic vulnerability. A $3 billion hedge fund founded by a former Point72 deputy reaching the same conclusions from the same SEC filings as a Substack author in Santa Barbara — independently, around the same time — is either a remarkable coincidence or a testament to how obvious the problems are once you actually read the footnotes. I’ll let readers decide which.
What I will say: nobody likes a Substack author. Hedge fund letters get the New York Times. I get Larry Swedroe.
Now here’s the part that ties it together. Cliffwater’s response to Rubric: the concerns were “overcited and belabored” — and Rubric had never contacted the firm before disseminating its analysis. Swedroe’s response to me: the analysis was published “without ever speaking to Cliffwater.”
Same playbook. Same words. And Swedroe didn’t contact me either.
Three parties. Three complaints about etiquette. Zero engagement with the math.
III. The Part Where He Calls the Track Record a Defense
Swedroe’s lead argument: CCLFX has delivered a 9.54% net total return since inception. No net realized losses. The track record speaks for itself.
Read that again. He is saying: the track record is great, therefore the analysis is wrong.
That’s not a rebuttal. That is my thesis.
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.
And the “narrow slice” claim? My analysis covers every year since CCLFX’s inception in 2019. Realized losses. Non-accruals. NAV trajectory. Cash flows. Leverage build. The entire history. If Swedroe read the work he’s attacking, he’d know that.
IV. The Part Where Cash Went to Zero
Swedroe says the fund “intentionally maintains minimal cash reserves” and calls the revolving credit facility “a deliberate and sophisticated approach to eliminate cash drag.”
Here is what actually happened. 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%.
The Macquarie repo collateral tells you something. You pledge your cleanest credits for repo. One of the seven pledged loans is Denali/GoTo — a company that completed a distressed debt exchange in February 2024. CCLFX marks it at 99 cents. If that’s the top of the book, what does the bottom look like?
And now the $1 billion Evercore-advised secondary that hit the market this week. Cliffwater is moving $1 billion of first-lien assets into a vehicle for an institutional buyer, retaining $9 billion of exposure to the same pool. 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.
V. The Part Where Total Debt Rose 43%
Total borrowings went from $6.8 billion to $9.8 billion in six months. I didn’t “isolate a single source of financing.” I reported the total from the balance sheet.
Swedroe says in the comments that “combined leverage is around 60%.” That conveniently excludes approximately $25 billion in PIV-level debt sitting structurally senior to CCLFX’s equity at the borrower level. The reported debt-to-equity ratio is 31%. Adjusted for embedded PIV leverage, the actual figure is somewhere between 70% and 150%.
The “full financing picture” he’s asking readers to consider makes the risk worse, not better.
VI. The Part Where Bloomberg Showed Up
March 9: Larry Swedroe publishes that “there is nothing unusual about CCLFX’s redemption experience.”
March 11: Bloomberg reports 14% redemption requests. Cliffwater caps repurchases at 7%. Half of what investors asked for this quarter will not be returned. Reuters confirms.
Q4 they went above 5%. Q1 they went to 7%. They still couldn’t honor half the requests. Each quarter, Cliffwater pays out more and falls further behind. That’s not market sentiment. That’s a queue. That’s the reflexive dynamic my stress model describes, playing out in real time.
Boaz Weinstein of Saba Capital called CCLFX a “turducken” on CNBC on March 10 and predicted 10-20% redemptions. He landed at 14%. Two of the most prominent hedge fund managers in credit markets are circling this fund. One called it the first domino. The other said it would “fall harder than it should.”
VII. The Part Where He Accidentally Told the Truth
This is the section that matters most. Read it slowly.
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.
I have found no disclosure in the semi-annual report, prospectus, or SAI explaining how a “valuation backstop” mechanically affects the NAV that investors use for subscriptions and redemptions. Swedroe says no one knew because “no one ever asked.” If material valuation arrangements are only discoverable by calling Cliffwater and asking nicely, the independent valuation process Swedroe touts in the same section is a fiction.
Larry Swedroe, personal investor, just put this in writing on a public Substack.
VIII. The Part About the Auditor
Swedroe devotes a full paragraph to defending Cohen & Company. Fine. Let’s talk about their PCAOB track record.
Cohen & Company’s 2021 PCAOB inspection found a deficiency specifically involving the failure to evaluate significant assumptions used in developing Level 3 fair value estimates at a registered management investment company. The PCAOB noted they didn’t sufficiently evaluate the assumptions the issuer used in developing an estimate.
That is the exact category of audit work required for CCLFX. 97% of the $40.6 billion portfolio is Level 3 or NAV practical expedient. And the firm that audits it was flagged by the PCAOB for exactly this kind of failure. At exactly this kind of entity.
The 2017 inspection also found a deficiency. Two in 43 audits inspected — and one was Level 3 valuations at a fund.
800 professionals. Deloitte has 460,000. Every comparable vehicle at $33 billion uses a Big Four auditor, not a ~50th ranked one with deficiencies.
IX. The Pushback I’ve Already Answered
“The loans pay interest.” — Nobody said otherwise. They deployed $15B in six months, distribute 9.5% against a 9.3% yield, have $6.3B in unfunded commitments they can’t refuse. Organic cash doesn’t cover outflows. (N-CSRS, p.126)
“The S&P ‘A’ rating proves it’s safe.” — It covers debt repayment, not equity. AIG had an AA. Equity is last in line.
“96% first lien.” — 38.7% of assets are PIVs. The largest chunk is CLO equity — first-loss, not first-lien. ~$25B in hidden leverage sits senior.
“PIK isn’t a problem.” — PIK growing 63% annualized. Borrowers can’t pay cash interest. Fund books phantom income, distributes it, borrows to cover the gap. That’s the spiral.
“You can’t predict liquidation values.” — Neither can the people marking the books. Phase 2 model: NAV from $9.46 to $0.35 over eight quarters at a 10% loss rate. A normal cycle. The death spiral kills equity long before terminal recovery math matters.
“97% Level 3 is normal.” — Common ≠ safe. 1.71% vol is what you get when you mark your own book. The 17x jump in realized losses is what happens when reality catches up.
X. The Part You Should Remember
Swedroe’s piece has no data. No filing citations. No quantitative rebuttals to any number I’ve published. What it has: an undisclosed financial interest in the fund being defended, a valuation backstop admission that doesn’t appear in SEC filings, and timing that Bloomberg falsified in 48 hours.
You cannot short this fund. It’s an interval fund. There are no options, no borrow, no way to express a bearish view through a trade. That’s part of the reason these vehicles have gotten so little scrutiny — there’s no financial incentive for anyone to do the work. No short seller is going to commission a 31-page audit of an instrument they can’t bet against. The wealth managers who distribute it earn fees. The consultants who recommend it earn fees. The auditor earns fees. The only people with an incentive to look closely are the investors themselves — and they’re trusting their advisors, who are trusting Cliffwater, who marks its own book.
I am not short CCLFX. I cannot be. I have no financial position that would benefit from this analysis being correct. I wrote this because I read the filings and the numbers didn’t add up. That’s it.
Larry Swedroe has a financial position. He didn’t disclose it. He didn’t contact me. He didn’t read the white paper. And 48 hours after he told his readers there was nothing unusual, Bloomberg told them there was.
Rubric Capital calls it the first domino. Saba Capital calls it a turducken. Cliffwater is liquidating a billion through Evercore. 14% of investors asked for their money back as of today.
The track record is great. Too great. That’s the whole point.
Larry Swedroe, I am happy to discuss further.
Nick Nemeth publishes Mispriced Assets and the CCLFX forensic audit series at markedtofantasy.com/articles. This is not investment advice.
Nick reminds me a little of Dan Sundheim (with his takedown of OCA), a little bit of the Feshbach brothers, a little bit of Marc Cohodes, and a whole lot of Keith Gill meets Bud Fox. I love it.
Nick --
Gentleman, Gifted Scholar,
AND,
a Grift Eating Machine.
Unstoppable:-)