The Most Dangerous Mistakes BDC Investors Keep Making

2026-03-02 11:59:13 ET

Business development companies, or BDCs ( BIZD ), are a bit of a difficult asset class to fully understand for income investors. On the one hand, they look very, very attractive due to their juicy yields that often exceed double digits, as well as the fact that those yields are backed by well-diversified, actively managed portfolios spread across 100-plus individual companies across a broad number of industries, with the vast majority of them invested in senior secured debt ( BKLN ) with contractual payments over relatively short periods of time. When you couple that with moderate amounts of leverage, investment-grade credit ratings, and underwriting teams that specialize in what they do and actively manage the portfolio to minimize credit losses and optimize total returns over time, the pitch sounds phenomenal....

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