ETF investors interested in gaining exposure to BDCs have a few options.
The E-TRACS Wells Fargo Business Development Index ETN (NYSEArca: BDCS) has a 0.85% expense ratio and a 7.33% annualized yield. BDCS tracks U.S.-listed BDCs. Unlike ETFs, an underwriting bank backs the exchange traded note, and if the bank goes under, investors could lose their principle.
The relatively new Market Vectors BDC Income ETF (NYSEArca: BIZD) has a 0.40% expense ratio and a 7.35% 30-day SEC yield. BIZD also tracks U.S.-listed BDCs. The fund includes a heavier allocation toward micro-cap stocks at 40% and about 30% in small- and mid-caps. Top holdings include Ares Capital Corp 16.5%, American Capital 13.7% and Prospect Capital 8.4%. [Market Vectors Adds Specialized Income ETF]
Investors can also track globally listed BDCs with the relatively new e ProShares Global listed Private Equity ETF (BATS: PEX), which has a 5.06% 30-day SEC yield and a 0.60% expense ratio. Nevertheless, North American BDCs still make up a hefty allocation at 80% and Europe accounts for the rest of the ETF. The fund leans toward mid-caps at 60%, followed by small-caps 24.9% and micro-caps 15.2%. [Private Equity ETF Gets Competition After 30% Rally]
The PowerShares Global listed Private Equity Portfolio (NYSEArca: PSP) is more diversified with greater overseas allocations. The U.S. is 45.6%, the U.K. 17.2%, France 7.6%, Sweden 5.2% and Canada 4.6%. The ETF also has a heavy weighting toward mid-caps at 64%, followed by small-caps 13% and micro-caps 14%. PSP has a 6.3% 12-month yield and a 0.70% expense ratio.
For more information on dividend funds, visit our dividend ETFs category.
Max Chen contributed to this article.
Story updated to correct the expense ratios for PEX and PSP.