Business development companies (BDCs) are closed-end investment vehicles organized under the Investment Company Act of 1940. Until June 2019 (when Cliffwater introduced the first evergreen private credit fund in the form of an interval fund), they were the traditional way investors could access the private credit market.
The private credit market has grown rapidly since the great financial crisis of 2007-2008. Assets under management now exceed $2 trillion. With this dramatic growth, we have seen significant changes that investors should be aware of that impact the risks of investing in BDCs.
A recent report from Raymond James highlights the dramatic increase in overlap in holdings across BDCs. In its report, Raymond James presented data showing five large BDCs — from Blue Owl, Carlyle, Goldman Sachs, Morgan Stanley and New Mountain — had overall overlap of more than 60 percent with each other. The research also showed the highest single pairwise overlap is between
