FSK - BIZD: BDCs Are A Sector Buy In A Higher For Longer Scenario

2024-05-30 12:48:05 ET

Summary

• Business development companies have benefitted from rising interest rates over the past two years.
• As sustained inflation prevents the Federal Reserve from lowering borrowing costs, BDCs stand to continue benefitting from an elevated interest rate environment.
• BIZD is an exchange traded fund that invests in BDCs.
• We explore the industry outlook and explain why BDCs stand to benefit from a "Higher For Longer" scenario.

Few sectors are more misunderstood than business development companies. Business development companies, also known as BDCs, are specialty finance companies that act as capital sources for middle market companies. The middle market is the core of the American economy comprised of both small unfamiliar companies and household names alike. As a frame of reference, these companies are generally somewhere between $1 million and $1 billion in annual revenue. This makes them too small for investment banks but large enough to benefit from advanced sources of financing. These smaller firms go to BDCs as a source of growth financing or end stage buyouts....

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