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BDC Troubles, 2025

yogibearbullyogibearbull
in Other Investing
BDC Troubles, 2025

".....Wall Street fund managers want 401(k) plans to include private credit, but similar products they have already sold to individual investors are in sharp decline this year.

Some of the same money managers leading the charge to “democratize” private markets—like KKR and BlackRock—are among the worst performers in the publicly traded private-credit funds called business development companies.

Business development companies, or BDCs, typically make high-interest loans to midsize corporations with junk credit ratings, using income from the loans to pay big dividends to their investors. They have become a popular way for fund managers to draw mom-and-pop investors into the booming private-credit industry. Demand for BDCs surged and the cash they manage has more than tripled since 2020 to about $450 billion, according to the law firm Mayer Brown.....

The BDC selloff began this summer, after falling interest rates reduced income from the loans they own. Then, a $14 billion fund managed by KKR reported heavy losses from loans gone wrong, and a rash of alleged frauds in companies such as the auto supplier First Brands spooked investors. JPMorgan Chase Chief Executive Officer Jamie Dimon, who has a love-hate relationship with private credit, warned about more credit “cockroaches” lurking.....

image

....."
WSJ https://www.wsj.com/finance/investing/the-private-credit-party-turns-ugly-for-individual-investors-287356f9
Open at MSN https://www.msn.com/en-us/money/companies/the-private-credit-party-turns-ugly-for-individual-investors/ar-AA1SLq0A

Comments

  • DrVenture
    That didn't take long.
  • rforno
    edited December 21
    “democratize” private markets = shifting major* investment risks from the books of Wall Street to the brokerage accounts of Main Street

    * and perhaps irresponsible / poorly-analyzed
  • MarkMark
    For a more complete listing of the BDC Universe

    https://cefdata.com/bdc-universe
  • AnnaAnna
    What a mess!
  • DrVenture
    I try to be pragmatic and provide the benefit of a doubt to almost anyone. This strikes me as a potential disaster for many unsuspecting investors.
  • rforno
    DrVenture said:

    I try to be pragmatic and provide the benefit of a doubt to almost anyone. This strikes me as a potential disaster for many unsuspecting investors.

    Reditt is replete with 'dividend investors' looking to buy into BDCs and the latest insanely high-income covered call funds. Even a few prominient (eg, generally respectable) SeekingAlpha pundits are still recommending them. IMO they're all playing with fire.....
  • BaluBalu
    edited December 21
    @yogibearbull, where does one go to find the NAV [of BDCs], other than the quarterly SEC filings?
    Is it available at the fund site I missed? e.g., https://www.fskkrcapitalcorp.com/for-investors/stock-information/
    Most CEFs do a good job reporting daily NAVs, and then there is CEFConnect.com.
  • stayCalm
    edited December 21
    For context, there's also this blurb in the same WSJ article. Defaults are rising but the sky isn’t falling (yet).

    "Defaults remain relatively low in BDCs overall but have risen, averaging 3.78% in September compared with 3.27% at the end of 2024, according to the financial-data provider Octus"
  • CrashCrash
    I've been following 6th Street. No money in it yet.
  • yogibearbullyogibearbull
    @BaluBalu, while BDCs are under ICA 1940, the listed BDCs report like listed companies (not listed funds). So, quarterly reported NAV for listed BDCs are no different than that for, say, BRK that is almost part CEF, part operating company. Some private firms may offer interim estimates for NAVs of bigger BDCs.

    The new legislation to make reporting for BDCs similar to REITs should address this issue too - but I haven't dug into the details.
  • BaluBalu
    Thanks YBB,.
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