Privateequityguy

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$CCLFX. $32.5 billion. The largest interval fund in America. In 2021, ZERO borrowers were paying interest in IOUs. By September 2025: 188. And they thought: no losses, no redemptions. Read this. Cliffwater tells investors: "96% first-lien senior secured." "10% distribution yield." "Minimal losses." I parsed every position in their N-CSR filings on SEC EDGAR. All of them. I cross-referenced borrower names across every semi-annual filing. At least 53 borrowers were cash-pay in earlier filings. They used to pay cash interest. Then they couldn't. The loan was amended to PIK to avoid a technical default. Amend and extend. Cliffwater marks most at par. $1.24 billion. Five names that tell you everything: 1. WEALTH ENHANCEMENT GROUP — manages $136B in client assets. Can't service interest on its own subordinated debt. Holds a $23M tranche at 15% PIK — zero cash on that tranche. CW blended mark: 82c. My mark: 42c. The wealth managers can't manage their own leverage. 2. APEX SERVICE PARTNERS — HVAC rollup, 200+ companies, 43 states. Was cash-pay 2021-2024. Now holds 14.25% PIK sub-debt tranches paying zero cash. CW: 90c. My mark: 39c. Your AC repairman's parent company is paying its subordinated lenders in IOUs. 3. CPF DENTAL — dental chain. SOFR + 9.25% plus a 4.25% PIK component. All-in rate: ~18%. Maturity: December 31, 2025. The loan was due three months after the filing date. CW marked it at 99.7 cents. My mark: 64c. 4. PPV INTERMEDIATE HOLDINGS — healthcare. The name is the evidence: "Intermediate Holdings" = structural subordination. Sub debt. 13.75% PIK tranche, zero cash. CW: 97c. My mark: 37c. Behind SBA loans, revolvers, equipment lenders, tax liens, pension obligations, and every operating company creditor. Sixty cents of overstatement on a tranche paying nothing. 5. iCIMS — HR tech/SaaS. Was cash-pay from Mar 2022 through Sep 2024 in every filing. Now 10.07% PIK. The software company can't pay its interest bill. CW: 96c. My mark: 84c. Generous. Very generous. Even with a modest haircut, that's a confirmed credit event they won't recognize. The playbook: Borrower can't pay (SOFR went 0% to 5.3%) --> Amend to PIK (no default recorded) --> Extend maturity --> Mark at par (97% Level 3, no market price, Cliffwater sets its own marks) --> Book PIK as income ($57M of PIK interest in six months ended Sep 2025 alone) --> Collect fees Why they do it — the incentive: Cliffwater charges a 1% annual management fee on net assets. At $32.5B, that's $325 million a year. Every dollar of markdown reduces the fee base. Permanently. The incentive to not mark down is $325M/year. And here's the fund-of-fund layer they don't talk much about: six of their top ten holdings are CLOs, BDCs, and fund vehicles that charge their own fees underneath. Silver Point CLO ($1.4B), Barings Private Credit Corp ($919M), BlackRock Shasta CLO ($600M), Golub Capital, Blue Owl, AGTB. Your grandmother is paying Cliffwater 1% to invest in other funds that charge another 1-2%. Fees on fees on fees. On assets marked by the people collecting the fees. Cliffwater reports a non-accrual rate of 0.42%. I identified at least 53 borrowers that converted from cash-pay to PIK — borrowers that stopped paying cash interest. That is not 0.42%. That is systematic restructuring to avoid classification. Amend the loan before it hits non-accrual, and the number stays low. "First-lien senior secured" — on hundreds of holdco/intermediate/bidco positions, the collateral is equity of the subsidiary. Not the factory. Not the receivables. Not the cash. In liquidation: IRS eats first. Pensions eat. SBA eats. Revolvers eat. Equipment lenders eat. Employee claims eat. MCAs eat. Trade creditors eat. Then maybe the holdco "first lien" gets the scraps. They call that 96% senior secured. 97% of this fund is Level 3 — no observable market price. Cliffwater determines the value. Cliffwater collects the fees. Cliffwater reports the yield. And investors see 10% distributions and think it's safe. Remember that they went after unsophisticated investors. Retirement accounts. Your grandmother's financial advisor put her in this. First out gets the most out due to Cliffwater's bogus marks. Redemption requests just hit 14% in Q1 2026. The fund caps quarterly repurchases at 7%. This is the beginning. Every data point from their own N-CSR filings on EDGAR. CIK 1735964. Verifiable.

A company with $24 billion in revenue and 24% gross profit growth just cut 4,000 people while raising 2026 guidance to $12.2 billion in gross profit. Stock ripped 20% after hours. The market added roughly $6 billion in market cap. That's ~$1.5 million in enterprise value created per eliminated role. Block is the canary in the coal mine. And they're not alone. ASML cut 1,700 jobs last month while reporting record orders and said they were "choosing to make these changes at a moment of strength." Salesforce cut 5,000 after AI agents started handling 50% of customer interactions. Amazon cut 16,000 in January on top of 14,000 in October. Every one of these companies was growing when they did it. Dorsey said the quiet part out loud: intelligence tools paired with smaller teams have already changed what it means to run a company. He chose one massive cut over repeated rounds because, his words, gradual cuts destroy morale and trust. The restructuring charges are $450-500 million. At the operating income Block is guiding, that pays for itself in two quarters. After that, pure margin expansion. That's why Wall Street rewarded it instantly. Here's what's coming. Goldman estimates AI is already responsible for 5,000 to 10,000 net monthly job losses in exposed U.S. industries. Citigroup is planning 20,000 cuts. Dow just slashed 4,500. 40% of employers surveyed say they expect to reduce headcount because of AI. 30,700 tech jobs gone in the first six weeks of 2026 alone. Block went from 10,000 to 6,000 while growing revenue and raising guidance. Every CEO running a company with more than a few thousand employees is doing this math tonight. The canary just stopped singing.

Yesterday I announced to our investors that Slack Water Capital and our affiliates will no longer be allocating to new self-funded search opportunities. This decision is based on my belief that the environment for self-funded searchers, and self-funded search investors particularly, has deteriorated significantly since I first came up with the idea to launch a fund 3 years ago. While I still have a deep respect and admiration for the self-funded search model, having been a successful self-funded searcher myself, I believe the opportunity set today is no longer as attractive as it was even just 18-24 months ago for the self-funded search investor. When I first started investing in this space, the opportunity set was very different. High-quality businesses with recurring revenue, low customer concentration, and $1 to $2 million of EBITDA could routinely be purchased for 3-5x. Competition for these deals was relatively limited. They were too big for the average buyer but too small for most private equity. Today, there are far more buyers chasing these same types of SMBs. Private equity firms and their portfolio companies have come down market; family offices have proliferated and are looking for uncorrelated long-term holds with strong cash flow yields; and there is an exponentially growing number of aspiring ETA entrepreneurs looking to get in on the perceived gold rush. The results are predictable. Valuation multiples for quality businesses with $1 to $2 million of EBITDA have expanded materially. Deals that once traded at 3 to 5x, now routinely sell for 6 to 8x...and sometimes even higher! The 70-80% SBA loan, 10-20% seller financing, and 10-20% equity self-funded search model of the past simply doesn't work at these valuation levels. Thus, the self-funded searchers, on average, are left picking through the scraps left behind by other more experienced and better capitalized buyers. These scraps are typically the lower quality businesses with high customer concentration, greater economic sensitivity, more project-based revenues, greater key-person risk, and/or more operational complexity. And valuations for these businesses have moved up as well. These are primary types of businesses that are trading for 3-5x today. I do think there are still some opportunities in the sub $1 million EBITDA range for self-funded searchers. However, it is really hard to deploy a meaningful amount of capital into these smaller deals due to a small total equity check and the SBA's 20% ownership threshold. While these can be good opportunities for searchers and individual investors, they don't really move the needle for a fund. The typical self-funded searcher profile has also changed. The self-funded search model has been heavily marketed and romanticized on social media and podcasts. As a result, it now attracts a much wider pool of people than it did in the past. Many of the new crowd are not as well equipped to perform what is essentially a leveraged buyout of an incredibly fragile small business. Many of these new buyers underestimate how hard it is to successfully operate a small business while also servicing a significant amount of debt. They underestimate just how savvy the current business owner is, how hard they work, and how many roles they fill on a daily basis. Many searchers think they are buying passive income and can operate from behind a spreadsheet. Nothing could be further from the truth. Finally, when I started building Slack Water, there were only small handful of funds or larger investor groups focused on investing in self-funded deals. At the time, I felt like I was filling a real gap in the market. However, I no longer believe that to be the case. There are now dozens of funds and investor groups targeting the space. There was a period of time in 2025 where it seemed like there was a new fund focused on self-funded searchers being launched every week. In my opinion, there are just not enough "large", high-quality, self-funded search deals for all these funds to deploy that much capital in this space unless everyone is going to write a lot of $50k-$100k equity checks. And how much due diligence can you perform, and impact can you have post-closing, across 100 portfolio companies? This flood of new capital, and shortage of quality deals of size, is naturally causing these funds to compete for what limited deal flow there is. This competition is naturally pushing investor terms in an unfavorable direction. Less governance. Less downside protection. More aggressive structures. Higher entry multiples. Less equity participation. In my opinion, the combination of these 3 changing dynamics is not a great recipe for future returns for the space as a whole... Yes, there will still be exceptional operators who find those needles in the haystack, build great companies, invent innovative capital structures, and achieve extraordinary outcomes through self-funded search. I believe that strongly. However, in my opinion, returns for the "asset class" as whole over the next 3-5 years will likely not be what they were over the past 3-5 years. Rather than force capital into what I believe is a deteriorating environment, I believe the disciplined decision is to step aside. Personally, I've also discovered that I actually enjoy operating more than I enjoy being a passive investor. I enjoy the messy process and challenge of building something. The daily battles that inevitably popup. And, selfishly, having the final say on strategic direction. As a result, going forward Slack Water will focus on building our own platforms and explore new ETA models while remaining open to opportunistically investing across both private and public markets.