Professor Glenn A. Okun
The Rabid Capitalist: The Big Point is a summary of a detailed note available to paid subscribers.
Business development companies (“BDC”) are poised to continue to perform well in the early stage of an economic recovery. The performance of traditional financial services industries within the financial sector is likely to vary widely in the upcoming cycle. Increasing deposit costs of funding combined with loan-related write-offs and write-downs from commercial real estate mortgages and corporate loans could impair the rates of return available from banks, asset managers and investment managers. BDCs can capitalize on these headwinds by acting as the opportunistic investor taking advantage of this default-driven, constrained credit supply. BDCs will generate very attractive total returns while providing investors with the downside protection of high current dividend yields during stagnant and declining markets.
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