They are a publicly-traded company that invests in PE and VC-style investments. This essentially gives retail investors access to the private markets. BDC companies typically invest in mid-sized companies. This means that they go after companies that are too big for bank financing but not big enough to go public yet.
Are BDC stocks a good investment?
Most BDCs offer both debt and equity investments. Another key aspect of BDC stocks is that they need to pay out 90% of their income to investors. Doing this allows them to remain exempt from federal taxes. If this structure sounds familiar, it’s because it’s the same structure used by Real Estate Investment Trusts (REITs).
Are BDC shares regulated?
Venture capital funds keep a limited number of investors and must meet specific asset-related tests to avoid being classified as regulated investment companies. On the other hand, BDC shares are typically traded on stock exchanges and are constantly available as investments for the public.
Where do BDCs invest?
BDCs make debt and equity investments primarily in "middle market" companies that are generally a little too big for bank financing but not quite big enough to go public via an initial public offering (IPO). They invest in the proverbial Main Street … or at least, this is as close to Main Street as Wall Street gets.
