I will be adding a link to this page in the right hand menu where it will remain
This page is intended to be used as the discussion page for Business Development Company (BDC) items.
By adding this page it is hoped to take some of the discussion ‘pressure’ off of the Sandbox page which is the most used discussion page.
Users who liked this:
Given the couple of questions posted, I thought i would give my perspective. For work, I’ve met with many private credit managers (middle market direct lending, sponsored, many of which have a BDC) and invested with a few starting 2016/17. That really helped build a base of understanding in the space. I then subscribed to BDC Buzz for one year and so I could get his reports and it was invaluable. I would only do this if you are going to be making a $100k investment in BDCs to make it worth the cost, but it was a good education.
BDCs were nearly 15% of my personal portfolio back in mid-23 when I started selling down due to credit spreads tightening (under 400bps). I was too early…. but better early than late. Today I’m down to just owning 100 shares of my five favorite BDCs so I can watch them. I’m waiting for the next hiccup in credit when spreads blow out to 500+. That should coincide with equity market weakness and BDC prices falling in concert. It’s then that I’ll be interested in re-entering the space in size.
Today, almost all my in bound calls are from private credit managers. Allocators seem to view the asset class as the magic bullet… 10% returns with almost no vol. Private equity has slowed (fundraising, deals, distributions) and this, in turn, is going to cause some issues because many of these five year loans are made with the idea that the PE sponsor will have sold it in 5yrs and thus they’d be cashed out. My fear is that many of the new private credit managers (and their BDCs) have been able to raise large sums of money, get into syndicated deals, priced them assuming they succeed… and have no plan for what happens if they don’t. If you are going to invest in BDCs, I’d look to find managers that have analysts and teams that actually do work outs. It also means finding those that are big enough to be the majority lender… because they’ll have control if things go bad. Experience, scale, fees, leverage, % senior/unitranche.
mrinprophet your timing is perfect. Last night I was going over brands and companies I know in the building business. A major change has been going on since the 90’s with the consolidation of manufacturers and distribution by conglomerates and private equity that there are not too many independents left. It’s all 800# gorillas in the room. It’s gotten so bad these companies trade what they own between themselves. KKR buys something and owns it for a few years then sells it to Green partners.
I came across QXO on SA and I had to laugh when I read analysts saying the building market is fragmented and this group had raised like 2 or 4 billion to buy into the fragmented building industry and was going to make them more efficient by modernizing operations with management software. The investors who got talked into QXO need to get their money back. Oh, and the bloggers spouting how great QXO is going to be are not on my follow list.
mrinprophet, please share the 5 BDCs that you follow. I’m just an amateur in the space and I track about 12 BDCs, but it is obvious that many BDCs are in trouble with declining earnings and possibly future dividend cuts. It seems to be a bit of a mine field. I’ve had some success, but only by buying 2 to 4 weeks before earnings or dividend ex-dates and then selling about 2 to 4 days before those events. Very good returns, but it takes work and is more like gambling than investing. Thanks.
Happy to share… but I would caution that this is my list and not advice.
GBDC, CCAP, TSLX, ARCC, BXSL. These are in order from my highest to lowest conviction.
Raymond James puts out a BDC weekly report that I find very informative. The factors I mentioned in the above post show what I want to own… while I look to P/NAV relative to historical as when to buy. I would note that i follow closely a few more. Watch out for picking up pennies in front of the steamroller…
Thank you. I have CCAP and ARCC. I’ll research the other 3 and decide if they are a good fit for my portfolio. Best regards.
Thank you Sir! I started to get into a few BDC’s that I could not find any preferred for. I will look more closely at them
Here is the Raymond James link
https://www.raymondjames.com/-/media/rj/dotcom/files/corporations-and-institutions/investment-banking/industry-insight/bdc_update.pdf
Iv’ve owned ARCC for a long time ; it’s a core holding
also own FDUS and been buying a smaller one lately BBDC
Couple questions here on BDC’s See Papa Doc’s post from about a month ago. It brought up a good point about the larger Private Equity firms gaining market share and buying up smaller BDC’s or leaving small BDC’s to fight over the higher risk crumbs. This is the rule of the jungle or business world. If you think about it.
I was going through old files and shredding old paperwork. Came across trades for Wickes Co’s , Lumber 84 now all we hear about is HD and Lowes.
I apologize for the long entry. Where I am going is this.
I had an offer today of 35% off a one time annual subscription of an analyst group. They review BDC’s and CEF’s as well as preferred and bonds. Honestly their regular subscription is half what some of the other talking heads are asking.
Here’s the thing, I sometimes get more insight from the comments than the article. This brings me back to Papa Doc’s observation. When you compare Market cap, Yield, Share price and the important non performing loans aspect of BBDC and BXSL I can see the correlation between the difference in risk and yield between the bigger and the smaller.
I have not been happy with SA’s business model and not sure I want to pay for observations by what Tip Ranks calls a Blogger. I think I have read here that if you sign up for a subscription and drop it SA will block you. Any experiences from others here ?
Charles M: I signed up to SA for 1 year and dropped it. I can still get quotes from it, and I can research a stocks earnings, divs., NAV, etc. I can also read about 1 article per month, but that’s it, so I’m very selective about what I read. I found that a small number of writers were quite good, but most were not.
goin2cali, I read a lot of what is available to the public on SA and if it’s blocked I am not sure it’s that important.
I am open to reading what any writer has to say but on the other hand there are some I avoid because they are shallow and the writers pump out massive volumes just to get an audience. No one is 100% on their picks so if they are correct 60% of the time and their winners are bigger than their losers they come out ahead, just like a roommate I had 40 yrs ago who played the ponies.
Some of these writers used to be professionals doing analysis and we all should know by now how great the track record is of the majority of mutual funds over time.
The comments are the little nuggets of gold I find more valuable.
SA is the only subscription I have ; and I feel it’s well worth the money;
i have several excellent analysts I follow for ideas and their current take
on my holdings ; Preferreds, BDCs and CEFs
Quick question for any BDC investors out there.
How are the publicly traded BDCs going to compete with the Blackrocks of the world when Blackrock is paying $12B to gain more market share in the private credit industry? Blackrock already had an $85B private credit platform. Isn’t the private credit market essentially just a giant BDC?
Been considering shorting some of the bigger publicly traded BDCs in 2025 or even BIZD. My guess is all that will be left for them is lending to the truly high risk companies. You can already see some of the mistakes they are making in recent BDC EPS reports.
https://www.reuters.com/business/finance/blackrock-strikes-12-bln-deal-private-credit-firm-hps-investment-2024-12-03/
“Dec 3 (Reuters) – BlackRock will buy private credit firm HPS Investment Partners for about $12 billion in an all-stock deal, the companies said on Tuesday, as the world’s largest asset manager seeks to expand in a red-hot market.
Private credit, or lending to companies by institutions other than banks, has grown rapidly in recent years as stricter regulations made it more expensive for traditional lenders to finance riskier loans.
The asset class is expected to grow to $2.6 trillion by 2029 from $1.5 trillion at the end of 2023, according to Preqin data, opens new tab.
“Together we will deliver income solutions for our clients that blend both the best of the public markets and the best of the private markets in an organized, unified fashion,” BlackRock CEO Larry Fink said on Tuesday.
He has previously outlined private credit to be a “primary growth driver” within alternatives for BlackRock in coming years.”
Thanks Doc,
Actually their buying spree could extend to some of the larger and older P.E. like Carlye group. which is private but runs the publicly traded BDC CGBD.
What then?
Good luck shorting in this high fueled growth area. You would need a catalyst like another extended covid with companies going dormant and shutdown. I don’t think any analysts are recommending to short this space at all. A lot of $$$ continue to be made in this space, especially since the rate reductions are slowing down.
Medical staff on the front line of the battle against mpox in eastern Democratic Republic of Congo have told the BBC they are desperate for vaccines to arrive so they can stem the rate of new infections.
bs.gl
At a treatment centre in South Kivu province that the BBC visited in the epicentre of the outbreak, they say more patients are arriving every day – especially babies – and there is a shortage of essential equipment.
blacksprut com
https://bs2bot.cc
Mpox – formerly known as monkeypox – is a highly contagious disease and has killed at least 635 people in DR Congo this year.
Even though 200,000 vaccines, donated by the European Commission, were flown into the capital, Kinshasa, last week, they are yet to be transported across this vast country – and it could be several weeks before they reach South Kivu.
“We’ve learned from social media that the vaccine is already available,” Emmanuel Fikiri, a nurse working at the clinic that has been turned into a specialist centre to tackle the virus, told the BBC.
He said this was the first time he had treated patients with mpox and every day he feared catching it and passing it on to his own children – aged seven, five and one.
“You saw how I touched the patients because that’s my job as a nurse. So, we’re asking the government to help us by first giving us the vaccines.”
The reason it will take time to transport the vaccines is that they need to be stored at a precise temperature – below freezing – to maintain their potency, plus they need to be sent to rural areas of South Kivu, like Kamituga, Kavumu and Lwiro, where the outbreak is rife.
The lack of infrastructure and bad roads mean that helicopters could possibly be used to drop some of the vaccines, which will further drive up costs in a country that is already struggling financially.
At the community clinic, Dr Pacifique Karanzo appeared fatigued and downbeat having been rushed off his feet all morning.
Although he wore a face shield, I could see the sweat running down his face. He said he was saddened to see patients sharing beds.
“You will even see that the patients are sleeping on the floor,” he told me, clearly exasperated.
“The only support we have already had is a little medicine for the patients and water. As far as other challenges are concerned, there’s still no staff motivation.”
blacksprut com
Capital Southwest Announces Pricing of Convertible Notes Offering…
https://www.globenewswire.com/news-release/2024/11/05/2974571/0/en/Capital-Southwest-Announces-Pricing-of-Convertible-Notes-Offering.html
Does anyone have experience / comments on BIZD, the VanEck BDC income etf? I am setting up my wife’s retirement dividend account and would like to include at least one BDC in the account. BIZD is an etf that includes many BDCs (ARCC, Main St, KKR, etc) / pays a 10% dividend / Morningstar rating of 3*. However it does have a very high expense ration of 10+%.
I currently own ARCC and am very happy with it’s performance. On the surface, BIZD appears to good to be true.
this is an Index fund , and the fees seem excessive for doing nothing but tracking an Index; 21.7% of it’s assets are in ARCC ;
so just by it ; I also own OBDC and MSDL on their top ten list , and i;de buy either one of those now ;
Ted, thanks for the comments. I will take a look at both OBDC and MSDL. I am looking for “sock drawer” dividend paying investments for my wife’s retirement portfolio. Based on a very quick look, MSDL does not appear to meet this criteria.
Larry, this website might help a little bit in your research. It’s a weekly summary of statistical data about BDC’s. It is not comprehensive, but it’s a start…
scroll down to the bottom for a PDF you can use.
https://www.raymondjames.com/corporations-and-institutions/investment-banking/industries-of-focus/financial-services/bdcs-closed-end-funds-and-spacs
LarryL, here is another BDC source. once again, not comprehensive but a good place for a quick reference. The website takes a while to load.
https://cefdata.com/bdc/
Another BDC website to be aware of is https://bdcreporter.com/
Depending on how much you are planning to invest in BDCs, the paid subscription might be worth your while. I was a frequent reader back when more analysis was available for free, and the analysis was always clear and in depth.
yes, that’s a good one and i’ve read his reporting for a number of years now.
would recommend PBDC actively managed bdc etf.. it has outperformed since inception september 2022 with little variance.. the pbdc/bizd pair is currently trading near fair value
mjtroll, both of these funds have very similar holdings, both track an index and both have very high expenses at approximately 13%. Don’t understand how an index tracking fund can get away with charging such high expenses.
Thanks for the info.
Went from half to full position in MSDL @ $19.72.
msdl – definitely one of the, if not the, best values (with high quality) right now in bdc space imo
mostly due to the lockup releases of the stock for the formerly private bdc imo
i started a position here yesterday and will add on weakness
I thought this article from Fitch on PIK and BDC’s was interesting. I’d like to find more information on this subject.
https://www.fitchratings.com/research/corporate-finance/fitch-ratings-bdc-cash-income-dividend-coverage-pressured-by-payment-in-kind-income-03-09-2024
Thanks Voner, good read. Article picked out several of the better known BDC’s and posted their credit rating and PIK income. Two metrics to look at. What the article didn’t do was give an example of BDC’s that have higher PIK. Also something to look at is the percentage of loans placed on non payment.
I believe there are a couple types of PIK- the less dangerous is written into the original contract, the other develops as the company gets into trouble & writes a pik IOU, so to speak.
Q online is showing a new issue , CICB 7.5%
The best source of information on all BDC’s that I have found is The BDC Universe, https://cefdata.com/bdc/.
This is a free site where information is updated daily.
You can print a 4 page report (landscape) of all BDC’s and relevant financial inf.
It takes a few minutes to download due to all the info.
Thanks for the link.
Is there any site where PIK income is summarized by BDC?
Great question.
The only source I am aware of is BDC BUZZ which requires a subscription.
BDC BUZZ has free articles on Seeking Alpha. It is an excellent source of their methodology and analysis. If you enjoy their free stuff and are interested in going deeper, there’s a good chance you’ll find their paid material (subscription service) well worth it. I’ve learned there’s a lot more to BDC investing than NAV yield etc.
https://seekingalpha.com/author/bdc-buzz/analysis
The “BDC Reporter” (https://bdcreporter.com/) has a lot of information, most of it only for paying subscribers although there is the occasional freebie. It is a one-man operation run by one very thorough analyst. The quality of what I have read is excellent, but my BDC portfolio is not larger enough to justify paying for a subscription.
BDC New Mountain Finance, (NMFC) issued new make whole note 6.2% due 10/15/27 Baa3/BBB-/BBB-, cusip #647551AG5.
CEFA is a great resource for CEFs.
https://www.cefa.com/
Does not provide debt issues of the underlying.
Does provide a lot of product information as well as relative to indexes and ratings.
Very useful for comparisons and identifying ‘silos’ for sector diversification.
I generally prefer total assets greater than $50 – 100mm. While $50mm may seem low, there are several long-time vendors, 15-20years++ who have maintained smaller-sized total-portfolio holdings. They have survived and also generate nice $Distros!
JMHO, Steven
Thanks Steve, All the info everyone is sharing is great 👍
One of my fav. BDC which add to periodically is ARCC.
Glad entertaining separate thread for BDCs.
Tim,
Have you given any thought as this site’s popularity grows that this current format might not work out long term? Some examples are it is hard to find older conversations, that more complex topics are hard to discuss over a longer period of time due to them getting buried/lost, that longer topics cannot be held reasonably well due to structure of them, etc…?
I agree this works perfectly fine with fewer users but if I walked away for a month and came back it would be difficult to catch up in a reasonable manner. Sometimes a conversation starts in READER ALERTS, then flows over to a main post you create, and then possibly leaks into the sandbox down the road. It is hard to keep track of things. When people post things they obviously want the most eyes on it as possible to get the best replies.
Just talking out loud. I am not sure what replacements there are with minimal work while also keeping the blog like nature of the site. This currently feels very word pressy to me.
Tim,
I hope others don’t mind, but I might also discuss CEF here as a lot of us hold preferred in them and some may hold the common.
BDC / CEF might work . I find myself looking at more income alternatives as rates drop.
Bear, the new head of Vanguard said that the company would be looking at the expansion of fixed income. Will probably take quite awhile but at least they are headed in the right direction. Here are a few clips from their release and a link to the article…..
Vanguard’s new chief, Salim Ramji, said on Wednesday that he plans to expand the fixed income offering of the U.S. top asset manager given the market’s size and opportunities.
“When you look at the macro environment for fixed income today , relative to say 10 years ago, it has a really important place,” said Ramji. “It’s going to be more important based on … our views of the long-term rate
environment,” he added.
Ramji said he was also looking at opportunities in private markets, a sector that includes debt and equity that is not publicly traded or listed. “In privates we’re open to exploring partnerships,” he said.
https://www.reuters.com/markets/us/vanguards-new-ceo-eyes-fixed-income-offering-expansion-2024-09-25/#:~:text=NEW%20YORK%2C%20Sept%2025%20(Reuters,the%20market's%20size%20and%20opportunities.
Steve good post. Doesn’t take a lot of thought about adding more fixed income considering that the over 60 demographics has been increasing and we want less risk and a little more safer income. Also since the retail investor is restricted from buying anything designated 144a it would make sense for Vanguard to buy and package something for income investors.
CM
It’s a good time to review CEF.!! I like to remind myself what their longer term charts look like…..as I take a closer look at any issue. Some are still buys at such high levels.
If you Prefer, what is the coverage, do they have preferred, what level of debt do they invest in, and what is the extent of non-performing loans. discount to nave means little to me but I like seeing the stock above 10.00 a share, the higher the better. I like to see if Quantum lists any reverse stock splits. I also like going to the dividend channel and looking at the history of the common dividend to see if it has been increasing or is there a history of dividend cuts. Cutting dividends is an indicator to me of the preferred being a higher risk investment.