This week we chat with Stephen Nesbitt, Chief Executive Officer of Cliffwater LLC. Cliffwater is one of the largest alternatives advisory firms, assisting clients globally in their allocations to hedge funds, private equity and real assets.

The Lead Left: Steve, tell our readers a bit about Cliffwater.

Steve Nesbitt: We advise pensions and endowments. Think of us as an institutional advisory and consulting firm. We cover alternative investments such as private debt, private equity, and hedge funds. Essentially anything that’s not stocks and bonds. We help institutional investors with portfolio construction.

TLL: You’ve also created something called the Cliffwater Direct Lending Index. Tell us about that.

SN: We created the CDLI because there was no benchmark for direct lending and the collateral it represents. The index is a by-product of our effort to institutionalize the direct lending space.

Over the years we tried to collect information from investors but the quality and breadth of that data was very spotty. But we were also following the BDC market. There, in contrast, the quality of information in 10-Ks and 10-Qs was very good. So we reverse-engineered the collateral and asset information and were able to create a very high quality index.