BDC (Business Development Company) companies

Stocks
44

So, here’s the current situation:

Nordnet

Cannot buy:

  • Hercules Capital
  • Ares Capital (as of April, may or may not be available for purchase) cannot buy
  • CION Investment
  • Stellus Capital
  • Blue Owl Capital
  • PNNT
  • TriplePoint Venture Growth (TPVG)
  • Main Street Capital
  • Morgan Stanley Direct Lending Fund (MSDL)

Can buy:

  • Runway Growth
  • FS KKR Capital
  • New Mountain Finance
  • Horizon Technology Finance
  • Capital Southwest
  • SLR Investment
  • Golub capital
  • PFLT

edit: Added the outcome for Ares Capital (ARCC) according to Nordnet’s decision (1.4.2025)

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45

Let’s add at least these to the list:

Nordnet, can buy:
FDUS
GLAD

Nordnet, cannot buy:
GAIN
GSBD

Luckily there are brokers where you can buy BDC companies without restrictions :ok_hand:

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46

Nordnet list of “worth buying” (these I have bought recently):
Saratoga
Capital Southwest

It would be good to keep one list together. Is it possible here, for example, to somehow pin such a maintainable list post to the very beginning of the whole thread?

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47

If a list is pinned to the top, could it also include the domestic brokers from whom one can buy?

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48

So far, Nordnet is the only one that has blocked them at all.

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50

Is it possible to buy Main Street Capital through the Mandatum Trader One service?

51

I’ve been following the BDC sector from the sidelines for a while now. Currently, my portfolio only holds a small slice of Barings BDC, which I picked up during a dip a few years ago. I recently got rid of my last mREIT, so now there’s a spot open in my portfolio for a cash flow generator, and what better for this job than a BDC with a nice dividend.

However, my understanding of the deeper inner workings of these companies is still a bit thin, so I’ve been trying to dig through the options and guess where to put my money. A few companies consistently stand out, so the following firms have ended up as subjects for closer examination:

MAIN - Extremely expensive; even after the recent dip, P/NAV is almost 2x. It has paid out special dividends quite generously for many years, but the regular dividend is still quite a bit smaller than the sector average. On the other hand, the payout ratio is also significantly lower than its peers. Currently on the watchlist; if the price drops to numbers starting with four, the temptation to buy this increases significantly.

ARCC - In my opinion, another quality firm, with similar thoughts as with MAIN.

Then, the juiciest deals in my eyes:

Hercules Capital (HTGC) - The price has come down 13% in the last month, apparently due to the issuance of convertible bonds to the market, and as a result, the dividend is at a rather impressive 11.5% level. Last year, however, seems to have gone well; the payout ratio is at a healthy/low level compared to the sector, and additional dividends have already been promised for every quarter this year. On the downside, Hercules seems to be focused on “venture-lending” type activities, so this adds extra risk.

Blue Owl (OBDC) - Another +11% dividend monster, with a significantly larger portfolio than Hercules, though growth is a small question mark. The payout ratio is relatively low, and the company has not only been able to grow its regular dividend in recent years but also pay additional dividends on top of it. This would be the most interesting target for me right now, at least.

What are others’ thoughts, is there anything I’m not taking into account here? The most concerning thing about this whole endeavor, of course, is the antics of the Orange Man and whether he will manage to drive the entire US into a recession. On the other hand, the same fear is generally gnawing at the investment markets, but my gut feeling is that BDCs are, on average, in a much worse position if the economy goes south.

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53

You’ve done a good job researching.
I have all of those as oversized positions (approx. 20,000-40,000 EUR/share), partly because they have also appreciated in value.

ARCC is the largest position in my portfolio, a stable and the largest BDC, but its price has drifted well above NAV compared to normal. I’m not adding more as I already have more than enough, and other BDCs have better prices.

MAIN: very expensive relative to NAV, but it usually has been, and now it’s more expensive than usual. A favorite among investors and internally managed, which is also liked. My average price is slightly over $25, I’m not adding more unless it drops significantly from current prices without its own fault.

HTGC: like MAIN, has gained a lot of fans and is also expensive. Internally managed. I also have “enough” of this in my portfolio, I won’t add more unless it drops significantly from current prices without its own fault.

OBDC: recently merged with another BDC from the same manager (Blue Owl), and synergies are also expected to increase NAV. Of those mentioned, I bought this one last (other BDCs after this), and the price is now below NAV, so thumbs up for this one.

Generally, your basic thesis is to buy below NAV, but as stated, especially internally managed BDCs are rarely available below NAV except in special situations, and many (quality) externally managed BDCs are also more or less above NAV.

These four mentioned BDCs (like almost all other BDCs) have very broadly diversified their investments, which provides a certain resilience. Certainly, if a recession comes, prices will drop, but these may not face dividend cuts, at least not if we don’t enter a prolonged recession.

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55

Thanks for the input, nice to hear it didn’t go completely awry!

Indeed, it’s always nice to buy good things cheap, even though the share price development doesn’t seem to be the main point in these companies, and we’re primarily after dividends here.
The share prices in all of them are pointing southeast, and I’m trying to get rid of my bad habit of catching falling knives :slight_smile:

Now I just need to time the purchases to the bottom and look into a crystal ball to see if the recession will come to the American wonderland or not :stuck_out_tongue:

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56

Unsurprisingly, Nordnet then went back on its promise and continues its policy of being, along with Avanza, the only bank in the Nordics that generally does not allow the purchase of BDCs :clown_face:

“Apologies for previous misinformation and confusion. The following information is correct. It is true that ARCC is now not registered as an LP (“Limited partnership”), but instead is registered as a so-called BDC (Business Development Company) which is a type of Closed End Fund, which has now made it possible for professional investors to invest in the security. Due to the security being a Closed End Fund, it will not be available to non-professional investors as we cannot deliver the KID or receive the issuer’s target market data which is a requirement according to the PRIIPs directive from the EU. This unfortunately means that ARCC will not be tradable for non-professional clients in the near future”

This part strongly suggests that Nordnet has calculated “lost revenue vs. cost” and just decided to take the lazy way out:

as we cannot deliver the KID or receive the issuer’s target market data

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57

And no one was surprised…

But Nordnet can buy to the list: TRIN

So was it possible here to somehow pin posts so that one could get one maintainable list?

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58

Why can Kayne Anderson BDC (KBDC) stock be bought from Nordnet even though it is a closed-end BDC company?

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59

That’s because Nordnet has blocked them randomly/arbitrarily.
Some have probably even been forgotten, so shhh so they don’t notice.

All BDCs are essentially CEFs, but have chosen to operate as companies under BDC rules.

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60

This topic is closely related to BDC companies, as the Trump administration is planning significant increases to the withholding tax on dividends from U.S. companies if the recipient’s domicile is in a “tax-unfriendly country” such as EU member states.

Currently, the withholding tax is 15%, but if this “Section 899” law passes (as it already did in the House of Representatives), an additional 5 percentage point tax will be added to the withholding tax, which will then be increased by 5 percentage points each year for four years starting next year, meaning the additional tax will eventually reach 20 percentage points. On top of this, of course, is the Finnish tax authority’s share, as before, meaning the total tax would be at least 45.5%.

https://www.reuters.com/business/finance/wall-street-fears-foreign-tax-budget-bill-may-reduce-allure-us-assets-2025-05-29/

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61

Well, the proposal I’ve been waiting for and fearing finally came.

In this case too, if it comes into force, they will shoot themselves in the foot, and badly, but I’m afraid that stupidity and bravado will win.

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62

Does anyone else have similar experiences with the ARCC firm as I wrote in the brokers thread:

63

Nordnet hasn’t even bothered to comment on why these reinvestment plans cannot be done through them. I myself would have set up quite a few of them, as new shares are usually available at a discount through such plans.

64

OP is also quite lazy and just states that maybe there will be costs that I will pay. Likewise, I didn’t even know that MAYBE new shares could be bought at a discount. It’s getting challenging, too bad.

65

It is beneficial for those investing in BDC companies to understand that the US, long considered a stable pillar of the financial system, is sliding into a zone of uncertainty, and simultaneously, the strong growth of private credit is substantially increasing the risks of investing in business development companies.

The FT describes in this brand new article the situation and the escalating risk level, based on a report by Moody’s, the US Securities and Exchange Commission, and an expert from the US Treasury. The opacity of BDC companies and their significantly weaker risk buffers compared to banks make them a potential trigger for systemic problems (and of course for these companies themselves and their shareholders).

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66

That’s not unique to ARCC or BDCs; rather, reinvestment (DRIP - dividend reinvestment plan) is a very common dividend-related practice in the US. It also involves various tax benefits and such for them, somewhat similar to our OST (Share Savings Account) and savings insurance policies.

I have a few dividend-paying stocks at OP that have defaulted to this reinvestment, which seems to work just like this:

  1. When the dividend arrives, instead of money, that stock is automatically bought with the full amount.
  2. The remaining portion is credited to the account.
  3. A normal brokerage fee is charged for the purchase.

So it’s just like you bought the stock yourself. In the US, there are no brokerage fees for this, but for foreign investments, there are.

You have to specifically request to change it to come as money if you wish. You send a message in OP’s “Messages” section to investment-related inquiries.

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