Markets· August 17, 2026 at 01:00 a.m.
Business Development Companies (BDCs) Show Promise After Market Slump
Key takeaways
- BIZD is showing signs of recovery after a challenging first half
- The ETF offers a high yield of around 11%
- BDCs benefit from floating-rate loans in a high-interest-rate environment
After a challenging first half of the year, business development companies (BDCs) are showing signs of recovery, particularly the VanEck BDC Income ETF (BIZD). The ETF's stock holdings, led by Ares Capital (ARCC), have attracted continued interest despite concerns over illiquidity and investor demand for capital withdrawals.
The recent upward price trend in BIZD is encouraging, with the PPO crossing above the zero line, a historical indicator of positive market movements. However, potential overhangs remain that could impact future performance.
BIZD, with a five-year beta of 0.64, offers a high yield of around 11% and is currently valued at $1.7 billion. BDCs provide direct private debt financing to small-to-mid-sized businesses, benefiting from floating-rate loans in an environment where interest rates remain above historical lows.
Recent trends in the industry, such as private equity sponsors supporting portfolio companies and strict underwriting standards, have eased fears of widespread middle-market defaults. However, credit quality degradation and prepayment risk remain concerns that could impact BDCs' performance.
Rob Isbitts, a semi-retired CIO and Barchart columnist, suggests that BIZD represents high-risk, high-return potential, currently trading within a $12 to $15 price range. The double-digit yield offers an attractive return for equity investors.
