BDCs

[FreeGoldRush]

Any thoughts on BDCs? FSK just posted a loss for 2022 Q2. This appears to be the first time since 2020 Q2. I suspected they may be hurting a bit with rising rates since most of their loans are variable rate and below investment grade. The stock prices of the BDCs don't seem to indicate much worry about that.

Thoughts?

 

[MoreLeverage]

rising rates since most of their loans are variable rate

This is why BDCs have done well. They’re mostly float rating assets backed by a mix of fixed and floating rate loans. So their costs are low and their returns are rising with interest rates. Here’s a well known BDC vs a BDC etf and SPY.

 

[maxinger]

For the past fw thousand years, BDC has been moving
between 30 and 90.

It will continue to move between 30 and 90 for the next
few thousand years.

 

[FreeGoldRush]

This is why BDCs have done well. They’re mostly float rating assets backed by a mix of fixed and floating rate loans. So their costs are low and their returns are rising with interest rates.

Between 2006 and 2007 mortgage backed securities began to fail because they were given to subprime borrows and their rates were adjusting higher. These BDC loans are already at high rates and below investment grade and the rates on them are rising. Why won't companies like FSK continue to lose money in a rising rate environment?