Why private credit?

Sources: Franklin Templeton Capital Markets Insights Group, Bloomberg, ICE BofA, Federal Reserve, FTSE, Cliffwater, Mornigstar, S&P Global, NCREIF. As of 31 March 2025. The indices used are Cliffwater Direct Lending Index for US Private Debt, Morningstar European Leveraged Loan Index for Global Leveraged Loans, ICE BofA Global High Yield Index for Global High Yield, FTSE EPRA Nareit Global REITs Index for Global Public REITs, NCREIF Fund Index - Open End Diversified Core Equity for US Private REITs, Bloomberg Global Aggregate (7–10-Year) Index for Global Bonds, US Benchmark Bond - 10-Year Index for U.S. 10Y Treasury and Bloomberg Global Aggregate Index for Global Aggregate, S&P International Corp Bd TR USD for Global Corporate Bond. This information is provided for illustrative purposes only. Hypothetical portfolio results shown do not represent the performance of an actual investment. The results are rebalanced quarterly and assume reinvestment of ordinary income and distributions. The results do not reflect a deduction of fees, taxes and other expenses, if any, which would reduce performance.

“Cliffwater,” “Cliffwater Direct Lending Index” and “CDLI” are trademarks of Cliffwater LLC. The Cliffwater Direct Lending Indexes (the “Indexes”) and all information on the performance or characteristics thereof (“Index Data”) are owned exclusively by Cliffwater LLC, and are referenced herein under license. Neither Cliffwater nor any of its affiliates sponsor or endorse, or are affiliated with or otherwise connected to, Franklin Templeton Companies LLC, or any of its products or services. All Index Data is provided for informational purposes only, on an “as available” basis, without any warranty of any kind, whether express or implied.  Cliffwater and its affiliates do not accept any liability whatsoever for any errors or omissions in the Indexes or Index Data, or arising from any use of the Indexes or Index Data, and no third party may rely on any Indexes or Index Data referenced in this report. No further distribution of Index Data is permitted without the express written consent of Cliffwater. Any reference to or use of the Index or Index Data is subject to the further notices and disclaimers set forth from time to time on Cliffwater’s website at https://www.cliffwaterdirectlendingindex.com/disclosures.

Private credit investment risks: Private credit investments can be similarly impacted by interest rates as publicly offered fixed income securities. Additionally, privately offered credit investments including private debt and loans are suitable only for investors who can bear the risks associated with private market investments (such as private credit and private equity) with potential limited liquidity. Shares will not be listed on a public exchange, and no secondary market is expected to develop. Assessing the value of privately offered credit investments can be hindered by a lack of available information and depend on representations made by the borrower. There can be no assurance that such representations are accurate or complete, and any misrepresentation or omission may adversely affect the value of such investments.

Leveraged loans investment risks: Leveraged loans carry similar risks as private credit investments, but carry a higher degree of risk, since borrowers typically have high levels of debt and/or a low credit rating. Due to the higher risk associated with these loans they typically pay higher interest rates, but also carry a higher risk of default.

Real estate investment risks: Risks of investing in real estate investments include but are not limited to fluctuations in lease occupancy rates and operating expenses, variations in rental schedules, which in turn may be adversely affected by local, state, national or international economic conditions. Such conditions may be impacted by the supply and demand for real estate properties, zoning laws, rent control laws, real property taxes, the availability and costs of financing, and environmental laws. Furthermore, investments in real estate are also impacted by market disruptions caused by regional concerns, political upheaval, sovereign debt crises, and uninsured losses (generally from catastrophic events such as earthquakes, floods and wars). Investments in real estate related securities, such as asset-backed or mortgage-backed securities are subject to prepayment and extension risks.

Private Real Estate Investments Risks: Private real estate bears the same risks as real estate in general, but additionally is suitable only for investors who can bear the risks associated with private market investments (such as private credit and private equity) with potential limited liquidity. Shares will not be listed on a public exchange, and no secondary market is expected to develop.

Fixed income investment risks (including US Government securities): Bond prices generally move in the opposite direction of interest rates. As the prices of bonds in the fund adjust to a rise in interest rates, the fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. High-yield bonds are subject to greater price volatility, illiquidity and possibility of default.