What Are Business Development Corporations (BDCs)?
BDCs have opened private-equity-style investments to a wider range of investors. Created by Congress in 1980, BDCs are generally publicly traded closed-end funds that help provide capital to small- and mid-size businesses that do not have access to traditional sources of financing. Participation of a BDC in these businesses can include secured and unsecured debt, mezzanine debt, convertible securities, and common and preferred stock.
BDCs are generally known for their income-generating characteristics. They are primarily U.S.-centric and exposed to small capitalization companies. An allocation to BDCs may be helpful in a rising rate environment, since they often have a significant portion of their portfolios invested in loans with variable rates tied to LIBOR (The London Interbank Offered Rate is the average interest rate estimated by leading banks in London that the average leading bank would be charged if borrowing from other banks).
Utilize our expertise. AAM conducts an eight layer analysis of publicly traded BDCs and a five factor review of each fund’s portfolio prior to inclusion in the portfolio.