By Stephen L. Nesbitt – Chief Executive Officer, Chief Investment Officer of Cliffwater.




The recent growth in SEC-registered alternative funds (private BDCs, private REITs, interval funds, and tender funds) is a direct byproduct of wealth management’s efforts to diversify into alternatives.  Unlike the limited partnership interests favored by institutions, these alternative funds offer investor protections, administrative convenience, immediate investment, and enhanced liquidity, all things important to individual investors.  In a few years, these alternative funds have attracted over $100 billion in investor capital.  

Of particular interest to investors is the conditional promise of quarterly liquidity (withdrawal) from the alternative funds.  For most funds this means investors can get all their money out in any quarter, if requested withdrawals across all investors does not exceed 5% of net fund assets.  When requested withdrawals exceed 5% it triggers an event called “proration” wherein requested withdrawals are cut back proportionately. 

The press attention directed at the recent proration experienced by Blackstone’s BREIT fund has raised broader questions about the incidence of proration generally.  To address potential concerns, Cliffwater conducted a three-year study covering 56 SEC-registered alternative funds.  Findings can be summarized as follows:

  • Proration is a low probability event, occurring at an 8% frequency across all funds and quarters,

  • Proration events occurred at a much higher 14% frequency during the four quarters of 2020 when COVID disrupted markets, and

  • During the aftermath of the 2022 market meltdown, proration events have thus far occurred at a 7% frequency, one-half the proration frequency during COVID.

Our study suggests that investors in alternative funds should have confidence in the availability of quarterly liquidity without the implementation of proration; with exceptions for either prolonged periods of market stress or fund-specific circumstances such as poor performance.

Original Article

About the Author:

Steve Nesbitt 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.