Business development companies (“BDCs”) were created by Congress in 1980 to serve as closed-end, venture capital funds for retail investors by financing small to mid-sized U.S. private companies. Since about 2004, BDC formations have focused on private credit investments that generate attractive and steady yield distributions to BDC shareholders as well as private equity/VC investments. BDCs are now also able to invest in small-cap (less than $250 million in common outstanding) listed issuers. BDCs may offer better outcomes for portfolio managers than other types of registered closed-end funds because, among other things, BDCs can compensate their advisers with incentive fees, allow twice as much leverage with a 150% asset coverage ratio requirement, and can, with shareholder approval, sell additional BDC shares for less than net asset value per share.
Please see full publication below for more information.
