Comparing Corporate Debt Mutual Funds

Corporate debt offers attractive yields, particularly through an interval fund with limited liquidity. I compare one such fund, CCLFX, to more traditional, liquid mutual funds.

When considering investment options, many investors focus on the expense ratio (ER) of the funds. While expenses are important, they should not be the only consideration. The corporate loan market provides a good example of the wisdom of looking at things in the whole and avoiding the mistake of only considering the expense ratio.

As shown in the chart below, over the past 28 years, regulatory reform and industry consolidation have driven banks away from corporate lending activity. “Shadow banking” emerged with independent asset managers funded by capital from institutional investors, replacing banks as providers of secured first-lien commercial loans. By April 2022, the private credit market had grown to about $1.2 trillion.

Source: Cliffwater