Data sourced from Dakota Marketplace, the global LP and GP intelligence platform trusted by thousands of investment professionals. Learn More | Book a Demo
A wealth advisor's client wants private credit exposure without a multi-year lockup. The advisor's answer is often a ticker, and the ticker is usually a BDC. For a fundraiser, the useful questions are what a BDC actually is, why RIAs reach for one, and which ones they hold.
What a BDC Is
A business development company is a closed-end investment company that elects BDC status under the Investment Company Act of 1940. Congress created the structure in 1980 to move capital toward smaller and middle-market companies, and today most BDCs are lenders. They make senior secured, unitranche, and second lien loans to private companies, which is why they sit inside the private credit conversation.
Four features define how they work:
- Pass-through taxation. Most BDCs elect to be taxed as regulated investment companies, which requires distributing at least 90% of taxable income. That is why yields run high and why holders receive a 1099 rather than a K-1.
- Asset tests. A BDC must invest at least 70% of its assets in eligible private or small public companies.
- Limited borrowing. Since 2018, BDCs can borrow up to a 150% asset coverage ratio, roughly two dollars of debt for every dollar of equity.
- Outside management. Most are externally managed by an alternatives firm for a base fee plus an incentive fee. Ares Capital Corp is managed by an Ares affiliate. Main Street Capital is a well-known internally managed exception.
BDCs come in two forms. Listed BDCs trade on an exchange and can price above or below net asset value. Non-traded and private BDCs sell shares at NAV with periodic liquidity and higher minimums, and they are the vehicles public pensions tend to commit to directly.
Raising private credit through the wealth channel? Find the RIAs who already own BDCs, filtered by ticker, AUM, and metro, and reach the advisor who makes the call. Book a demo of Dakota Marketplace.
Why RIAs invest
A listed BDC is the easiest way for an advisor to give a client private credit exposure. It settles like any other stock, and it needs no accredited investor or qualified purchaser paperwork. Positions can be sized in small tickets, trimmed when a client's plan changes, and held in model portfolios alongside everything else.
The return profile fits a common client need. Loans are mostly floating rate, so distributions move with short-term rates, and the mandatory payout gives advisors an income sleeve they can explain. Advisors also weigh the tradeoffs: a listed BDC can trade at a discount to NAV, borrowing amplifies credit losses, and management and incentive fees stack on top of the underlying loan returns.
The BDCs RIAs hold most
Dakota Marketplace carries 59,913 BDC investment records across multiple channels.
Focusing specifically on RIAs, below are the 10 most frequently used BDC’s by the RIA channel:
|
Rank
|
BDC
|
|
1
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Ares Capital Corp (ARCC)
|
|
2
|
FS KKR Capital Corp (FSK)
|
|
3
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Owl Rock Capital Corporation, now Blue Owl Capital Corporation (OBDC)
|
|
4
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Main Street Capital Corp (MAIN)
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|
5
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Blackstone Secured Lending Fund (BXSL)
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|
6
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Golub Capital BDC (GBDC)
|
|
7
|
Hercules Capital (HTGC)
|
|
8
|
Prospect Capital Corp (PSEC)
|
|
9
|
Goldman Sachs Middle Market Lending
|
|
10
|
Barings BDC (BBDC)
|
Source: Dakota Marketplace holdings data (13F filings)
The list is mostly large alternatives managers' flagship vehicles, with specialists such as Main Street and Hercules mixed in. For an investment firm raising through the wealth channel, this is the competitive set advisors already know.
Dakota Marketplace
Dakota Marketplace ties BDC holdings to the RIA behind them, with AUM, metro area, consultant relationships, and contacts on the same profile.
Filters that work for this topic:
- RIAs holding a specific BDC, such as ARCC or FSK
- RIAs holding several of the top ten BDCs
- RIAs by AUM band and metro area
- RIAs tagged as investing in private credit
If you are raising for the wealth channel, start with the advisors already holding private credit, not the ones who have never bought it. Book a demo of Dakota Marketplace.
