Cliffwater’s Role

Cliffwater works with clients on their total portfolio or portfolio segment in both a discretionary or non-discretionary capacity. We are one of the few major advisory firms whose expertise includes both traditional asset classes and the four major alternative asset classes: hedge funds, private equity, private debt and real assets.

Cliffwater manages discretionary portfolios across all asset classes or for one or multiple alternatives categories. We exercise daily management responsibility over the investments and provide portfolio administration.

In non-discretionary assignments, senior investment professionals help clients plan and implement a portfolio that meets industry best practices, ensures that clients see top-tier investment opportunities and gives them the information necessary to make informed decisions.

Asset Allocation

Cliffwater is an industry leader in expanding traditional asset allocation to include alternative assets. Annually, we publish long term return and risk forecasts for alternative and traditional asset classes, providing clients with a consistent methodology and source for asset allocation studies.

Cliffwater uses a set of proprietary asset allocation models that combine traditional and alternative asset classes to produce optimal portfolio choices that take into account the dynamic operating characteristics of each client’s environment.

These models integrate, through Monte Carlo simulation, uncertain asset returns with uncertain liabilities or operating results. Unlike models that work only with traditional investments, Cliffwater incorporates analyses that factor in the lack of liquidity and stickiness in rebalancing that are features of alternative investments.

Hedge Funds

Cliffwater has a team of investment professionals in its New York and Los Angeles offices focused exclusively on hedge funds. Their responsibilities include sourcing top-tier hedge funds, performing due diligence, gaining access for Cliffwater clients, and providing ongoing risk management of clients’ hedge fund portfolios through a disciplined monthly monitoring process.

Cliffwater’s clients largely invest directly in hedge funds, diversified by style, including market neutral, credit, distressed, event driven, equity long/short, macro and multi-strategy funds.

Our clients’ portfolio objective is to achieve equity-like returns at a bond-like level of risk. Cliffwater also assists clients in building custom hedge fund portfolios including portable alpha portfolios using hedge funds, tail risk portfolios, and single strategy hedge fund portfolios.

Private Equity

Cliffwater has a team of investment professionals in its Los Angeles office focused exclusively on private equity partnerships. Their responsibilities include formulating an investment plan for diversifying the private equity commitments across vintage years, sourcing top-tier private equity general partners, performing due diligence, gaining access for Cliffwater clients, negotiating partnership agreements, and providing ongoing monitoring of the portfolio, including participation on limited partner advisory boards.

Cliffwater’s philosophy is to identify a select group of private equity partnerships managed by firms that can produce first quartile investment returns.

Such firms have superior organizations and resources, value added investment strategies, a history of generating first quartile performance, and exhibit a continuity of professional staff and investment focus. Gaining access to these partnerships for Cliffwater’s clients is a vital part of our efforts, and senior Cliffwater professionals work hard to develop relationships with general partners, sometimes years in advance of their expected fundraising.

Private Debt

The Cliffwater private debt team conducts industry research and manager due diligence across a range of private debt opportunities, from senior secured lending to mezzanine debt to distressed lending. Our research includes two Cliffwater sponsored websites dedicated to private debt, and, each maintaining Cliffwater created indices of private debt. In addition, Cliffwater maintains comprehensive databases of private debt managers globally.

Cliffwater’s philosophy is to build a multi-manager portfolio that emphasizes current yield, minimizes credit losses, and takes advantage of unique opportunities.

We are also active in a top-down understanding of the credit markets and maintain credit valuation models that assist in positioning a diversified credit portfolio for differing stages of the credit cycle.

Real Assets

Investment professionals in Cliffwater’s Los Angeles office source top-tier investment opportunities in real assets, perform due diligence, gain access for Cliffwater clients, and provide ongoing monitoring of the portfolio. Investments include real estate, energy, timber, and other commodity oriented investments.

Cliffwater combines private and public investments to achieve a diversified global real assets portfolio that is intended to have a low correlation with public equities, a significant real return, and a high correlation to inflation.

REIT investments are used to achieve a diversified portfolio of core real estate holdings, coupled with investments in private opportunistic real estate partnerships diversified by sector, geography and across vintage years. Cliffwater also evaluates infrastructure opportunities. In energy, private investments emphasize partnerships that range from upstream opportunities in exploration and production to downstream distribution and servicing, to renewable and alternative energy partnerships. Timber partnerships play a role in Cliffwater allocations to real assets but, as with all alternative investment opportunities, due diligence pays close attention to current market valuation. Public investments include commodity futures strategies, global stock portfolios focused on natural resource companies, and commodity oriented hedge funds.