Business Development Companies Have High Income Potential
By Meredith Larson, Product Manager, VanEck
Business Development Companies (BDCs) can offer high income potential with low interest rate risk.
BDCs lend to and invest in small- to mid-sized private U.S. companies, which tend either to be rated below investment grade or not rated at all. Allocating to BDCs helps investors gain exposure to the growth and income potential of privately held companies, access that has traditionally been limited to institutional or high net worth investors.
Annualized Standard Deviation versus Annualized Return (%)
8/4/2011 – 3/31/2017
Source: FactSet, Bloomberg. Data as of March 31, 2017.1
Providing access to the private middle market space, BDCs have offered an historically attractive yield component and growth potential. In addition, with more than 70%, on average, of BDCs' loan portfolios structured as floating rate loans, their income is positioned to rise within a rising rate environment.
About the Author:
Meredith Larson joined VanEck in 2012 and serves as product manager for income and strategic equity exchange-traded funds. Prior to joining VanEck, she was with Lyster Watson & Co., a Registered Investment Adviser covering multiple alternative asset classes. Prior to that Ms Larson was with global equities specialist Altrinsic Global Advisors and Lazard Asset Management. She received her MBA from Fordham University.
The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.