FCRD - REITs Vs. BDCs: Comparing Returns And Positioning For Higher Rates

• BDCs continue to outperform in an inflationary and rising interest rate environment as investors prepare for higher rates that are accretive to BDC earnings to support higher dividends.
• Many equity REITs and most mortgage REITs have had negative stock price performance over the last 2 years.
• For the same amount of income with less risk, it's better to invest 50% less capital in BDCs at 8.6% compared to equity REITs at 2.8% to 3.8%.
• BDCs have been deleveraging, reducing fixed borrowing rates, shifting portfolios into secured assets in non-cyclical sectors with stronger covenants, and improving net interest margins.
• These changes have resulted in much stronger balance sheets ready for anything from an economic recession to an overheated economy driving inflation and higher interest rates.

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