BDCs Generic Thread

schrodingerscat

schrodingerscat

Recycles dryer sheets
Joined
Apr 15, 2023
Messages
106
Location
Los Angeles
Not a lot to report. The broad BDC market fell -2.31% over the rolling month, extending a multi-month slump that has pushed trailing 12-month returns down by roughly 22%. According to a June 2026 report by Fitch Ratings, the average leverage ratio across rated BDCs climbed to 1.11x, with multiple funds bumping up against the upper limit of their regulatory safety buffers (1.25x). Consequently, Net Investment Income dividend coverage slipped to 101.3%, prompting 11 rated BDCs to slash payouts to protect capital. Earnings quality has noticeably degraded. PIK income—where stressed borrowers pay interest using more debt rather than hard cash—has doubled compared to pre-2020 averages, hitting an average of 8.1% of total interest income across the sector. This cash-poor earnings mix has triggered broader lender scrutiny and a multi-month slowdown in new capital inflows.



Higher rates have stayed longer which for BDCs, increase borrowing costs for the client companies they finance. If rates rise too high or stay elevated for too long, it can strain borrowers' cash flows, leading to an increase in loan defaults or distressed restructurings. While rising rates act as a powerful tailwind for BDC dividends and profitability, they introduce a trade-off with credit risk. Investors typically monitor whether the extra income generated by the hikes outpaces any potential uptick in portfolio company defaults. BDC shares traded heavily in lockstep with macroeconomic risk sentiment rather than pure interest rate mechanics. Sticky inflation metrics and hawkish messaging from the Fed throughout June dampened broader risk appetites, punishing high-yield income vehicles like BDCs and CEFs.



When you buy a BDC, you're buying a hybrid vehicle that is part common equity stock and also part diversified portfolio, or even a closed-end fund, if you will, of floating rate loans that are indexed to short-term interest rates." The Elites (creating Alpha) MAIN, HTGC, CSWC. Keep compounding; these drive your primary portfolio growth. The Anchors (Beta) ARCC, FDUS, TRIN. Solid, steady middle-market income producers.

A compelling article from ADS Analytics 6.28.26: https://seekingalpha.com/article/49...-hawkish-fed-weighs-on-markets-including-bdcs

Long: CSWC 3.4%, HTGC 2.8%, ARCC 2.8%, TRIN 2.6%, MAIN 2.1%, FDUS 2.1%, CCAP 1.1%.
 
Let's also discuss AA. I am 50:50 so I have 50 chips to play with on the equity side. 3% PV in HTGC and 3% PV in CSWC. So 12% of my equities are BDCs. I like to monitor the ones living in the highest premium levels. You have them covered with these 2 plus MAIN and TRIN. I don't know much about TRIN, never followed them or heard any earnings calls. When I was first retired I listened to lots of earnings calls. Now I only do that if my equity holding has a sell-off and I want to hear "what did they say?" I just started taking RMDs and soon the BDCs will be candidates for that. I know they are not tax efficient, but I want my taxable account to generate at least 4-5% yield and I don't want to go beyond 10% PV in CEFs. Said another way, I am willing to sacrifice tax efficiency for liquidity provided by my income generation sleeve which also includes REITs.

P.S. I am curious about your username. Would you explain. I have a couple of ideas but wanted the real story.
 
17% of my AA is BDCs. At one time, I was allocating 20%, but the private credit environment over the last few years prompted me to hold back on buying. I've owned ARCC and HTGC since 2012 and 2014, respectively, and in the short time I've owned TRIN (2023), it's up more than my long timers! (Of course, timing is everything.) I'm a little hesitant to add to my REITs - 10% allocation - as the sector doesn't seem to have done all that well recently. My username actually came from a post I made on Fidelity's community a couple of years ago - having to do with quantum physics. I can't recall the circumstances where I made the initial comment, but it was relevant for the financial discussion I was engaged in. For a couple of years I would also post related jokes.
 
schrodingerscat said:
17% of my AA is BDCs. At one time, I was allocating 20%, but the private credit environment over the last few years prompted me to hold back on buying. I've owned ARCC and HTGC since 2012 and 2014, respectively, and in the short time I've owned TRIN (2023), it's up more than my long timers! (Of course, timing is everything.) I'm a little hesitant to add to my REITs - 10% allocation - as the sector doesn't seem to have done all that well recently. My username actually came from a post I made on Fidelity's community a couple of years ago - having to do with quantum physics. I can't recall the circumstances where I made the initial comment, but it was relevant for the financial discussion I was engaged in. For a couple of years I would also post related jokes.
Click to expand...
Well, I was thinking down the right path on the username, but I am a horseracing fan and I also saw .. scat and that is another path. You mean cat and that refers to an interesting thought experiment or paradox to ponder. My REITs are 9% PV:
3% in NHI yielding 4.8%
3% in CTRE yielding 3.7% (yield down because price up)
3% in VICI yielding 6.6% (should I have worries about Las Vegas?)

What REITs do you own?
 
PaulR888 said:
Well, I was thinking down the right path on the username, but I am a horseracing fan and I also saw .. scat and that is another path. You mean cat and that refers to an interesting thought experiment or paradox to ponder. My REITs are 9% PV:
3% in NHI yielding 4.8%
3% in CTRE yielding 3.7% (yield down because price up)
3% in VICI yielding 6.6% (should I have worries about Las Vegas?)

What REITs do you own?
Click to expand...
OHI, RQI, STWD, RLTY, AGNC, IYRI.
 
As of July 1, this is my BDC basket. The basket is 7.5% of my equity portfolio.

BDC Ticker% of BDC Basket
MAIN40.7%
HTGC6.8%
GLAD5.8%
GAIN6.7%
TSLX8.2%
CGBD4.3%
OBDC8.6%
ARCC5.5%
FDUS7.2%
GBDC3.8%
BXSL2.6%
 
PaulR888 said:
Let's also discuss AA. I am 50:50 so I have 50 chips to play with on the equity side. 3% PV in HTGC and 3% PV in CSWC. So 12% of my equities are BDCs. I like to monitor the ones living in the highest premium levels. You have them covered with these 2 plus MAIN and TRIN. I don't know much about TRIN, never followed them or heard any earnings calls. When I was first retired I listened to lots of earnings calls. Now I only do that if my equity holding has a sell-off and I want to hear "what did they say?" I just started taking RMDs and soon the BDCs will be candidates for that. I know they are not tax efficient, but I want my taxable account to generate at least 4-5% yield and I don't want to go beyond 10% PV in CEFs. Said another way, I am willing to sacrifice tax efficiency for liquidity provided by my income generation sleeve which also includes REITs.

P.S. I am curious about your username. Would you explain. I have a couple of ideas but wanted the real story.
Click to expand...
"When I was first retired I listened to lots of earnings calls. Now I only do that if my equity holding has a sell-off and I want to hear "what did they say?"

I don't listen to many calls either, but I do review their "presentation" and the 10Q each quarter. Most of mine do a quarterly presentation, but not many include PIK in that presentation, so I have to go to the 10Q for that. I build my KPIs off those, then I try to verify my numbers with certain authors on SA.
 
schrodingerscat said:
Not a lot to report. The broad BDC market fell -2.31% over the rolling month, extending a multi-month slump that has pushed trailing 12-month returns down by roughly 22%. According to a June 2026 report by Fitch Ratings, the average leverage ratio across rated BDCs climbed to 1.11x, with multiple funds bumping up against the upper limit of their regulatory safety buffers (1.25x). Consequently, Net Investment Income dividend coverage slipped to 101.3%, prompting 11 rated BDCs to slash payouts to protect capital. Earnings quality has noticeably degraded. PIK income—where stressed borrowers pay interest using more debt rather than hard cash—has doubled compared to pre-2020 averages, hitting an average of 8.1% of total interest income across the sector. This cash-poor earnings mix has triggered broader lender scrutiny and a multi-month slowdown in new capital inflows.



Higher rates have stayed longer which for BDCs, increase borrowing costs for the client companies they finance. If rates rise too high or stay elevated for too long, it can strain borrowers' cash flows, leading to an increase in loan defaults or distressed restructurings. While rising rates act as a powerful tailwind for BDC dividends and profitability, they introduce a trade-off with credit risk. Investors typically monitor whether the extra income generated by the hikes outpaces any potential uptick in portfolio company defaults. BDC shares traded heavily in lockstep with macroeconomic risk sentiment rather than pure interest rate mechanics. Sticky inflation metrics and hawkish messaging from the Fed throughout June dampened broader risk appetites, punishing high-yield income vehicles like BDCs and CEFs.



When you buy a BDC, you're buying a hybrid vehicle that is part common equity stock and also part diversified portfolio, or even a closed-end fund, if you will, of floating rate loans that are indexed to short-term interest rates." The Elites (creating Alpha) MAIN, HTGC, CSWC. Keep compounding; these drive your primary portfolio growth. The Anchors (Beta) ARCC, FDUS, TRIN. Solid, steady middle-market income producers.

A compelling article from ADS Analytics 6.28.26: https://seekingalpha.com/article/49...-hawkish-fed-weighs-on-markets-including-bdcs

Long: CSWC 3.4%, HTGC 2.8%, ARCC 2.8%, TRIN 2.6%, MAIN 2.1%, FDUS 2.1%, CCAP 1.1%.
Click to expand...
Thanks for doing this thread. I like that there are separate CEF and BDC threads here.
 
Fahshah said:
I haven’t made any changes to my BDC allocation in months.

TRIN 3.21%, CSWC 2.14%, ARCC 1.91%, FDUS/BXSL tied at 1.23% (total allocation 9.71%)

REITS: IYRI, AGNC, DX, RITM & STWD
Click to expand...
Hi there! My BDCs have done well since purchase. My REITs not so much. I'm intrigued with IYRI. But then, I'm intrigued with all of the NEOS funds.
 
While they make no observations about BDCs specifically, a recent PIMCO website piece defining their current strategy asserts that we are NOW ENTERING a default cycle, which, if correct, obviously bodes ill for weaker junk credit products. It's available to all on their website.
Regards, Dick
 
Last edited:
dickoncapecod said:
While they make no observations about BDCs specifically, a recent PIMCO website piece defining their current strategy asserts that we are NOW ENTERING a default cycle, which, if correct, obviously bodes ill for weaker junk credit products. It's available to all on their website.
Regards, Dick
Click to expand...
The better ones here that most of us own historically have very good underwriting. Also, I don't trust anything that has Owl in its name.
 
schrodingerscat said:
Hi there! My BDCs have done well since purchase. My REITs not so much. I'm intrigued with IYRI. But then, I'm intrigued with all of the NEOS funds.
Click to expand...
I moved my individual REITs to IYRI in order to simplify my portfolio. This increased my income and lessened the number of stocks to watch. I guess more of an experiment with a small part of my portfolio. I haven’t looked at IYRI vs my basket of REITs. Somehow life gets in the way and time is spent better elsewhere: traveling, grandchildren, gardening and life in general!

12/2/25 bought 1,230 shares of IYRI. Dividends $4,800 + CG’s $500 VS amount invested = TR 8.56%. How does this compare to a REIT index? I haven’t had the time to look.

As far as other NEOS Funds:
MLPI purchases 12/26-4/26 - TR 12.32%
SPYI purchases 11/24-4/26 - TR 15.88%
QQQI purchases 6/25-6/26 - TR 16.12%
XQQI purchases 2/26-5/26 - TR 8.13%
XSPI purchases 2/26-6/26 - TR 6.12%

BDC’s:
CSWC purchases 3/25-8/25 - TR 16.46%
TRIN purchases 1/24-4/26 40.81%
ARCC purchases 3/18-8-23 - TR 103%
 
Fahshah said:
I moved my individual REITs to IYRI in order to simplify my portfolio. This increased my income and lessened the number of stocks to watch. I guess more of an experiment with a small part of my portfolio. I haven’t looked at IYRI vs my basket of REITs. Somehow life gets in the way and time is spent better elsewhere: traveling, grandchildren, gardening and life in general!

12/2/25 bought 1,230 shares of IYRI. Dividends $4,800 + CG’s $500 VS amount invested = TR 8.56%. How does this compare to a REIT index? I haven’t had the time to look.

As far as other NEOS Funds:
MLPI purchases 12/26-4/26 - TR 12.32%
SPYI purchases 11/24-4/26 - TR 15.88%
QQQI purchases 6/25-6/26 - TR 16.12%
XQQI purchases 2/26-5/26 - TR 8.13%
XSPI purchases 2/26-6/26 - TR 6.12%

BDC’s:
CSWC purchases 3/25-8/25 - TR 16.46%
TRIN purchases 1/24-4/26 40.81%
ARCC purchases 3/18-8-23 - TR 103%
Click to expand...
Hi @Fahshah, It's good to hear from you. I have also wandered into the NEOS funds. SPYI at 3%, MLPI 2.7%, IYRI 1%. I prefer GPIQ over QQQI. Keep an eye on XSPI as it has only $80M in AUM. You own the best in BDCs. Be well, C
 
For BDC's I have: ARCC, BIZD, CSWC, MAIN, OBDC and TPVG. All together they only represent 5% of my market holdings. I think I will slowly increase that.
I also recently wandered in to some NEOS funds: MLPI, SPYI and QQQI.
 
You must log in or register to reply here.

Similar threads

schrodingerscat
BDCs May 2026
2
upwiththesun
upwiththesun
schrodingerscat
BDCs Nov. 2025
hotwired
H
schrodingerscat
BDCs August 2025
Montecfo
M
schrodingerscat
BDCs Oct. 2025
FlyingCircus
FlyingCircus
dickoncapecod
BDC Questions
2
Anitya
A

Latest posts

Back
Top Bottom