Investors Embrace the BDC ETF

The search for added yield and income can take investors to some unique asset classes, including business development companies (BDCs). Often high-yielding, BDCs are accessible in the form of an exchange traded fund with the Market Vectors BDC Income ETF (NYSEArca: BIZD).

BDCs offer attractive income opportunities since they are required to pay out 90% of income in form of dividends, a structure similar to what income investors find with real estate investment trusts (REITs).

The companies essentially help fund small $5 million to $100 million businesses. Ever since the financial crisis, regulators have clamped down on traditional lenders and made it harder for businesses to access public capital, which has forced smaller business to take loans from BDCs.

BIZD, which is more than five years old and holds 26 BDCs, has recently been seeing increased investor interest. The ETF’s 30-day SEC yield of almost 9% could be one reason why.

“Assets for BIZD have taken off this year, increasing by more than 40 percent to $195 million through June 21, according to Bloomberg data. Buyers poured $21 million into the ETF in May, the largest month of inflows since its inception in February 2013, the data show,” reports Carolina Wilson for Bloomberg.