Dotty's BDC Research
BDC Sector & Credit Assets (General)
Corporate credit (BDCs, loans, HY bonds) should be viewed as cash-flow bets, not capital-gain bets.
The priority is predictable income streams rather than price speculation.
Current market discounts seem to imply unrealistic default assumptions — essentially pricing in a “1930s-level depression.”
Most BDC portfolios consist of secured loans with 60–70 % recovery rates. Defaults would need to reach 30–40 % to justify 15–20 % NAV losses — highly improbable.
Overall, sector valuations appear to offer large downside cushions.
Corporate credit (BDCs, loans, HY bonds) should be viewed as cash-flow bets, not capital-gain bets.
The priority is predictable income streams rather than price speculation.
Current market discounts seem to imply unrealistic default assumptions — essentially pricing in a “1930s-level depression.”
Most BDC portfolios consist of secured loans with 60–70 % recovery rates. Defaults would need to reach 30–40 % to justify 15–20 % NAV losses — highly improbable.
Overall, sector valuations appear to offer large downside cushions.
Bain Capital Specialty Finance (BCSF)
Noted a mismatch between a “Hidden Gem” headline and a downgrade — inconsistent messaging.
No specific valuation stance, but a skeptical tone toward the mixed narrative.
Noted a mismatch between a “Hidden Gem” headline and a downgrade — inconsistent messaging.
No specific valuation stance, but a skeptical tone toward the mixed narrative.
FS KKR Capital (FSK)
Current pricing looks like a strong opportunity.
A dividend adjustment is already priced in.
Even with a cut to $2.00 annually, the yield would still be around 12.5 %.
The existing discount already reflects expected payout reductions.
Current pricing looks like a strong opportunity.
A dividend adjustment is already priced in.
Even with a cut to $2.00 annually, the yield would still be around 12.5 %.
The existing discount already reflects expected payout reductions.
Barings BDC (BBDC) & MassMutual Siblings (MPV/MCI)
Management pedigree (Barings/MassMutual) is a key strength.
Offers exposure to the same origination pipeline as MPV and MCI.
Important to distinguish private credit strategies (BBDC, MPV/MCI) from broadly syndicated loan funds.
Management pedigree (Barings/MassMutual) is a key strength.
Offers exposure to the same origination pipeline as MPV and MCI.
Important to distinguish private credit strategies (BBDC, MPV/MCI) from broadly syndicated loan funds.
Nuveen Churchill Direct Lending (NCDL)
Managed by highly experienced teams (Churchill Capital / Nuveen / TIAA).
Appears attractively priced for solid reasons — a competent sponsor behind a relatively new vehicle.
Managed by highly experienced teams (Churchill Capital / Nuveen / TIAA).
Appears attractively priced for solid reasons — a competent sponsor behind a relatively new vehicle.
PBDC (Pimco BDC ETF)
The real expense ratio is roughly 0.75 %, not the inflated figure caused by double-counted BDC expenses.
Claims that fees offset yield are inaccurate.
Attractive due to its curated portfolio of top BDCs and strong distribution rate.
The real expense ratio is roughly 0.75 %, not the inflated figure caused by double-counted BDC expenses.
Claims that fees offset yield are inaccurate.
Attractive due to its curated portfolio of top BDCs and strong distribution rate.
BIZD (VanEck BDC ETF)
Actual management cost around 0.4 %.
BDC operating expenses are corporate, not fund-level costs.
Offers broad diversification and is suitable for all phases of the credit cycle.
In falling-rate environments, NII may decline slightly, but credit quality typically improves — an acceptable trade-off.
Actual management cost around 0.4 %.
BDC operating expenses are corporate, not fund-level costs.
Offers broad diversification and is suitable for all phases of the credit cycle.
In falling-rate environments, NII may decline slightly, but credit quality typically improves — an acceptable trade-off.
EIC (Eagle Point Income Co.)
Favored as a CLO-debt-focused vehicle (~73 % CLO debt, 25 % equity).
Considered “on sale” at about a 15 % discount.
Capital base is more stable than CLO equity funds such as ECC or OXLC.
Favored as a CLO-debt-focused vehicle (~73 % CLO debt, 25 % equity).
Considered “on sale” at about a 15 % discount.
Capital base is more stable than CLO equity funds such as ECC or OXLC.
ECC & OXLC (CLO Equity Funds)
OXLC has shown both profit and loss cycles over the past decade.
NAV total return averages ≈ 9 % per year over 10 years, making 15–20 % below-NAV entry points attractive.
ECC has a comparable profile and opportunity.
These funds carry high leverage (≈ 10× equity) and require close monitoring.
CLOs are structured with about 10 % equity / 90 % debt, meaning equity is highly leveraged to credit cycles.
OXLC has shown both profit and loss cycles over the past decade.
NAV total return averages ≈ 9 % per year over 10 years, making 15–20 % below-NAV entry points attractive.
ECC has a comparable profile and opportunity.
These funds carry high leverage (≈ 10× equity) and require close monitoring.
CLOs are structured with about 10 % equity / 90 % debt, meaning equity is highly leveraged to credit cycles.
CEFS (Saba Closed-End Funds ETF) & BRW
Both CEFS and BRW remain appealing.
CEFS is described as “lazy in a good way” — broad diversification with activist elements.
Articles dismissing BRW are disagreed with; performance viewed as strong.
Both CEFS and BRW remain appealing.
CEFS is described as “lazy in a good way” — broad diversification with activist elements.
Articles dismissing BRW are disagreed with; performance viewed as strong.
BGH (Babson Global High Yield Fund)
Viewed positively as a sustainable high-yield, monthly-income fund.
Managed by a respected Mass Mutual credit team (same family as MPV/MCI/BBDC).
Viewed positively as a sustainable high-yield, monthly-income fund.
Managed by a respected Mass Mutual credit team (same family as MPV/MCI/BBDC).
RQI (Cohen & Steers REIT Fund)
Endorsed as a solid, steady, monthly income REIT vehicle.
Endorsed as a solid, steady, monthly income REIT vehicle.
KIO (KKR Income Opportunities Fund)
Considered a steady high-yield income fund.
Works well when paired with FSCO and EIC for balanced exposure to loans and bonds.
Considered a steady high-yield income fund.
Works well when paired with FSCO and EIC for balanced exposure to loans and bonds.
ARDC, ISD, UTG, UTF, JBBB, JAAA, FOF, NIE
Seen as steadier, lower-risk holdings for larger portfolios targeting ≈ 8 % yields.
Combining them can lower overall portfolio risk.
Seen as steadier, lower-risk holdings for larger portfolios targeting ≈ 8 % yields.
Combining them can lower overall portfolio risk.
DNP & Other Utility CEFs
Praised as safe, dependable income streams.
Praised as safe, dependable income streams.
Other Key Views
Stay fully invested, continuously collecting 9–10 % cash yields and reinvesting rather than attempting market timing.
Return of Capital (ROC) is often misunderstood — it frequently represents deferred unrealized gains and can be tax-efficient.
Closed-end funds (CEFs) are a structure, not an asset class; discounts provide extra working capital and are ideal for illiquid credit holdings.
BDC credit notes (e.g., unsecured debt issues) are BBB-rated and considered quite secure, since the entire BDC equity layer would have to be wiped out before noteholders incur losses.
Stay fully invested, continuously collecting 9–10 % cash yields and reinvesting rather than attempting market timing.
Return of Capital (ROC) is often misunderstood — it frequently represents deferred unrealized gains and can be tax-efficient.
Closed-end funds (CEFs) are a structure, not an asset class; discounts provide extra working capital and are ideal for illiquid credit holdings.
BDC credit notes (e.g., unsecured debt issues) are BBB-rated and considered quite secure, since the entire BDC equity layer would have to be wiped out before noteholders incur losses.
Comments
Post a Comment