This video is intended to help investors and investment professionals understand the structural, trading and investment differences in BDC funds which are a subset of 40-Act closed-end management companies that also elect to be regulated by the BDC regulations.
They are in their simplest sense: 1. Active Portfolio Management. 2. Permanent or Fixed Capital. 3. and Investor Liquidity, through listing on a US stock exchange like The NYSE or NASDAQ. There are currently 51 listed BDCs and 42 of them are debt-based (over 66.67% debt assets).
BDC funds are primarily different than traditional CEFs in that they:
1. Can Charge Incentive Fees
2. Only produce a NAV quarterly as they generally hold private investments of equity and/or debt.
3. Often trade above NAV so can regularly add capital through a secondary offering of shares to investors.
4. Can use leverage up to 50% of net assets (1:1, debt to equity ratio)
5. Historically yield between 8% and 12% to shareholders based on market prices (current avg is 9.7%)
6. Currently trade 5X the average dollars per day than traditional taxable CEFs.
The views and opinions herein are as of the date of publication and are subject to change at any time based upon market movements or other conditions. None of the information contained herein should be constructed as an offer to buy or sell securities or as recommendations. Performance results shown should, under no circumstances, be construed as an indication of future performance. Data, while obtained from sources we believe to be reliable, cannot be guaranteed. Data referenced in the video come from CEFA's Closed-End Fund Universe Dated 9/19/14.