Business Development Companies (BDCs) as an investment. Opinions?

In My Humble Opinion
1

I just recently heard about an investment type called “Business Development Companies” or BDCs. These apparently are similar to REITs (Real Estate Investment Trusts).

REITs invest in properties and return the profits from rents and leases as dividends to the shareholders. They also are usually (often?) Closed End Funds that trade on one of the stock exchanges.

BDCs are similar in that they are closed end funds, but instead of investing in property, they invest in businesses. They also distribute most of their income as dividends to their shareholders.

I’d like to hear people’s opinions about BDCs. What are your thoughts? (I have some concerns about these that I’ll voice after getting some feedback from others.)

Thanks,
J.

2

This is my one bump…

Anyone have any knowledge or experience with BDCs?

Thanks,
J.

3

You better understand the capability of the people managing and underwriting the underlying investments. How long is their track record? What is their experience? Do they have parameters for their portfolio. Does the company have contracts with its people to incentivize them to stay? These types of investments tend to have greater risk.