Ticker

BDCs have fallen out of favor. Given the elevated risks (at least as suggested by headlines), most durable income investors consider only top-quality BDC picks. While this coincides with my philosophy, the issue is that the return potential is automatically lower here.

We take a look at the action in business development companies through the first week of April and highlight some of the key themes we are watching. BDCs rallied strongly despite persistent poor market sentiment. Regulatory scrutiny is rising, but material changes are unlikely; public BDCs managing sub-investment grade assets face minimal direct threat from current discussions.

The market is panic-selling two of the most battle-tested BDCs. This creates a rare, time-sensitive window to lock in 10–14% yields at the deepest discounts. I detail the strengths, weaknesses, upside catalysts, and risks for these golden buying opportunities.

Stress is building in the private credit sector, but some analysts see a buying opportunity in publicly traded business development companies.

Currently, BDCs provide very high-yield opportunities. The fact that additional interest rate cuts are unlikely to happen this year should theoretically support the existing levels. Yet for most BDCs, the damage has already been done.