comlb
Lieutenant
Posts: 68
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Post by comlb on Dec 28, 2022 17:00:40 GMT
I have done REITs and MLPs over the years, but never spent much time on BDCs. At a high level the concept is sound enough, but always felt like you needed to know a lot about the management since they are basically running a hybrid of a very lightly regulated bank and private equity operation. Great when it works! But how do you know? In banks you have oceans of data you can sift through and make judgements.
Anyway, I always passed on these, but has been to my detriment since the one I considered Ares has double digit annual returns for a decade. I am still not convinced I understand Ares, but the historical track record is interesting to say the least. How well these do in an extended downturn remains to be seen. Barron's wrote a bearish article on these for that reason. Mentioned:
Ares Capital / ARCC Blackstone Secured Lending / BXSL FS KKR Capital / FSK Owl Rock Capital / ORCC
Closed-End Fund / Ticker Nuveen Credit Strategies Income / JQC BlackRock Corporate High Yield / HYT
I have not tracked any of these over a long haul, the yields range 8-10%. Great if they are built to last. Oaktree also has one called Oaktree Specialty Lending / OCSL.
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BDCs
Dec 28, 2022 17:11:26 GMT
comlb likes this
Post by bugman on Dec 28, 2022 17:11:26 GMT
My service likes BXSL, ARCC, BGDC among others.
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Post by shridog on Dec 29, 2022 15:59:22 GMT
I have invested in BDCs for the 18 years or so. Currently 36% of our NAV is in BDCs. I belong to a paid Forum which does an excellent analysis on BDCs and has kept me out of trouble 90% of the time. KBW does a good job on BDCs then comes WF and Riley. Scott Kennedy on S/A is one of the best on BDCs and MReits. The market price of BDCs has taken a real hit this year, however the income is increasing. The good ones have significant fixed rate lines of credit or low rate bonds and at same time loan out at floating rate interest rates. The main concern in general is what will the default rate be if we go into recession. Currently default rate is low. Of the 30 some BDCs out there I hold 12. Of the 12, all have increased their divident this year either by specials or regular. Since BDCs are an income vechile they really haste to lower their regular dividend. The key is of course management and their ability to do due diligence on borrowers. My top holdings are CSWC, HTGC, RWAY, TSLX and ARCC in that order.
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comlb
Lieutenant
Posts: 68
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Post by comlb on Dec 29, 2022 16:17:44 GMT
thanks both - It does seem like an interesting sector, and like REITs and MLPs, management matters a lot. The bad ones get washed away in any downturn.
shridog, what paid forum do you use for BDCs?
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Post by shridog on Jan 3, 2023 19:20:06 GMT
I am a member of Value Forum. Not sure of the yearly fee. I pay $299 per year, but that could be a grandfathered rate.
Sorry for the delay, had company over the weekend and never looked at investing sites.
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Post by bugman on Jan 3, 2023 22:02:10 GMT
My service is ADS Analytics.
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Post by shridog on Jan 4, 2023 14:41:35 GMT
FWIW I think ADS Analytics is good on BDC's and CEFs. For BDC's read any comments by Bekster.
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BDCs
Jan 10, 2023 17:03:54 GMT
Post by Chahta on Jan 10, 2023 17:03:54 GMT
I have done REITs and MLPs over the years, but never spent much time on BDCs. At a high level the concept is sound enough, but always felt like you needed to know a lot about the management since they are basically running a hybrid of a very lightly regulated bank and private equity operation. Great when it works! But how do you know? In banks you have oceans of data you can sift through and make judgements.
Anyway, I always passed on these, but has been to my detriment since the one I considered Ares has double digit annual returns for a decade. I am still not convinced I understand Ares, but the historical track record is interesting to say the least. How well these do in an extended downturn remains to be seen. Barron's wrote a bearish article on these for that reason. Mentioned:
Ares Capital / ARCC Blackstone Secured Lending / BXSL FS KKR Capital / FSK Owl Rock Capital / ORCC
Closed-End Fund / Ticker Nuveen Credit Strategies Income / JQC BlackRock Corporate High Yield / HYT
I have not tracked any of these over a long haul, the yields range 8-10%. Great if they are built to last. Oaktree also has one called Oaktree Specialty Lending / OCSL.
I don't know much about this class (ARCC). Looked at M* and they show 6.88% for 10 year avg. TR. Is there something that makes BDCs a better than CEFs or equities?
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Post by marpro on Jan 10, 2023 17:18:07 GMT
I have done REITs and MLPs over the years, but never spent much time on BDCs. At a high level the concept is sound enough, but always felt like you needed to know a lot about the management since they are basically running a hybrid of a very lightly regulated bank and private equity operation. Great when it works! But how do you know? In banks you have oceans of data you can sift through and make judgements.
Anyway, I always passed on these, but has been to my detriment since the one I considered Ares has double digit annual returns for a decade. I am still not convinced I understand Ares, but the historical track record is interesting to say the least. How well these do in an extended downturn remains to be seen. Barron's wrote a bearish article on these for that reason. Mentioned:
Ares Capital / ARCC Blackstone Secured Lending / BXSL FS KKR Capital / FSK Owl Rock Capital / ORCC
Closed-End Fund / Ticker Nuveen Credit Strategies Income / JQC BlackRock Corporate High Yield / HYT
I have not tracked any of these over a long haul, the yields range 8-10%. Great if they are built to last. Oaktree also has one called Oaktree Specialty Lending / OCSL.
I don't know much about this class (ARCC). Looked at M* and they show 6.88% for 10 year avg. TR. Is there something that makes BDCs a better than CEFs or equities? 6.88% is wrong. M* is not the best place to look for some details, although I do check it for confirmation. I get the premium service free from one of brokerage account. Look at the chart in Stockcharts with reinvested distributions. It is a lot more than that over a 10-year period. ARCC is the largest BDC. Look at the holding channel for ARCC. Goldman holds more than 16 million shares ($1.658 Billion) in ARCC, and Morgan Stanley and RBC both hold 11 million shares.
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Post by mnfish on Jan 11, 2023 13:41:12 GMT
"Goldman holds more than 16 million shares ($1.658 Billion) in ARCC" which is about 1/10% of GS AUM
"Looked at M* and they show 6.88% for 10 year avg" PortVis shows 10.52%
"How well these do in an extended downturn remains to be seen" It outperformed SPY by more than double from 2008 to 2012 but interest rates were a lot lower. SPY is ahead by 10% since.
When you look at their holdings and what they charge these small companies for rates you wonder how much more those companies can pay when inflation is going to continue to affect them. You would think that the spread that ARCC is collecting would have to go down. When Powell says "there will be pain" with higher rates it seems like BDC's and the companies they finance are going to feel it first and worse.
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