Private Credit Proves Its Durability in Latest Cliffwater Index Report
The private credit sector has consistently demonstrated its strength even amid heightened scrutiny and market fluctuations. The Cliffwater Direct Lending Index (CDLI), recognized as the premier benchmark for private credit, recently unveiled its mid-year results.
As of June 30, 2026, the CDLI reported an impressive 3.0% return for the first half of the year and a remarkable 7.7% for the trailing twelve months, outperforming all major fixed-income indices. This performance is particularly striking considering the index has delivered an average return of 9.5% over its nearly 22-year history, suffering only one downturn in 2008.
An analysis of the 23,000+ private loans included in the CDLI shows robust health indicators. Notably, metrics such as non-accruals and payments-in-kind (PIK) income remain stable, well below historical averages. Importantly, the interest coverage ratios indicate resilience, suggesting that borrowers are comfortably meeting their obligations. The reported realized losses from defaults remain significantly low, at half the long-term average of 1.0%. Moreover, private loans are priced comparably to public loans at $0.98 and $0.96 respectively, reflecting a solid valuation framework.
Despite challenges faced in the first quarter, such as a 3% markdown in software loans, the second quarter showed stability with markdowns of less than 1%. This trend indicates that the potential impacts of artificial intelligence on loan defaults may have already been accounted for within private loan valuations. Interestingly, credit spreads widened for the first time in three years, a sign of shifting market dynamics that can influence interest rates and borrowing costs moving forward.
Liquidity remains a key strength of private loans, with non-interest cash flows – encompassing maturities and prepayments – staying above 6% every quarter. This consistent flow is more than adequate to satisfy liquidity requirements, showcasing their utility in times of market stress.
Stephen Nesbitt, CEO of Cliffwater and the mastermind behind the CDLI, expressed confidence in the asset class, stating, "The recent results highlight the resilience and consistency of private credit. In this domain, 'boring' is precisely what one seeks—steady, reliable performance. Despite ongoing anxiety regarding the safety of private credit, our data suggests such concerns are largely unfounded. This asset class remains a reliable solution and a safe haven amid broader market volatility."
Launched in 2015, the CDLI was the first of its kind, designed to track private loan performance accurately and provide clarity on the investment characteristics of this crucial sector. The index not only measures income but also captures the nuances of direct lending, establishing itself as an essential tool for investors in the private credit market. The success of CDLI led to the development of various sub-indices, including the CDLI-P, which monitors the performance of perpetual business development companies (BDCs), and the CWBDC, which focuses on public BDCs.
As of now, the CDLI encompasses over 23,000 directly originated loans totaling approximately $553 billion in assets, positioning it as a formidable benchmark in the private credit landscape.
Cliffwater LLC, established in 2004, is an independent alternative investment adviser renowned for its pioneering work in private markets. With a significant presence in the private equity sector, Cliffwater has positioned itself as a thought leader, contributing valuable research to the industry and offering innovative solutions through its various funds, including the largest private markets interval fund platform on the market, boasting $44.6 billion in net assets as of July 31, 2026. As the landscape of private lending continues to evolve, the insights provided by the CDLI will remain invaluable for investors seeking to navigate this complex environment, ensuring that private credit retains its reputation as a resilient asset class.
As of June 30, 2026, the CDLI reported an impressive 3.0% return for the first half of the year and a remarkable 7.7% for the trailing twelve months, outperforming all major fixed-income indices. This performance is particularly striking considering the index has delivered an average return of 9.5% over its nearly 22-year history, suffering only one downturn in 2008.
An analysis of the 23,000+ private loans included in the CDLI shows robust health indicators. Notably, metrics such as non-accruals and payments-in-kind (PIK) income remain stable, well below historical averages. Importantly, the interest coverage ratios indicate resilience, suggesting that borrowers are comfortably meeting their obligations. The reported realized losses from defaults remain significantly low, at half the long-term average of 1.0%. Moreover, private loans are priced comparably to public loans at $0.98 and $0.96 respectively, reflecting a solid valuation framework.
Despite challenges faced in the first quarter, such as a 3% markdown in software loans, the second quarter showed stability with markdowns of less than 1%. This trend indicates that the potential impacts of artificial intelligence on loan defaults may have already been accounted for within private loan valuations. Interestingly, credit spreads widened for the first time in three years, a sign of shifting market dynamics that can influence interest rates and borrowing costs moving forward.
Liquidity remains a key strength of private loans, with non-interest cash flows – encompassing maturities and prepayments – staying above 6% every quarter. This consistent flow is more than adequate to satisfy liquidity requirements, showcasing their utility in times of market stress.
Stephen Nesbitt, CEO of Cliffwater and the mastermind behind the CDLI, expressed confidence in the asset class, stating, "The recent results highlight the resilience and consistency of private credit. In this domain, 'boring' is precisely what one seeks—steady, reliable performance. Despite ongoing anxiety regarding the safety of private credit, our data suggests such concerns are largely unfounded. This asset class remains a reliable solution and a safe haven amid broader market volatility."
Launched in 2015, the CDLI was the first of its kind, designed to track private loan performance accurately and provide clarity on the investment characteristics of this crucial sector. The index not only measures income but also captures the nuances of direct lending, establishing itself as an essential tool for investors in the private credit market. The success of CDLI led to the development of various sub-indices, including the CDLI-P, which monitors the performance of perpetual business development companies (BDCs), and the CWBDC, which focuses on public BDCs.
As of now, the CDLI encompasses over 23,000 directly originated loans totaling approximately $553 billion in assets, positioning it as a formidable benchmark in the private credit landscape.
Cliffwater LLC, established in 2004, is an independent alternative investment adviser renowned for its pioneering work in private markets. With a significant presence in the private equity sector, Cliffwater has positioned itself as a thought leader, contributing valuable research to the industry and offering innovative solutions through its various funds, including the largest private markets interval fund platform on the market, boasting $44.6 billion in net assets as of July 31, 2026. As the landscape of private lending continues to evolve, the insights provided by the CDLI will remain invaluable for investors seeking to navigate this complex environment, ensuring that private credit retains its reputation as a resilient asset class.
Topics Financial Services & Investing）
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