Private Equity's Foggy Forebears

Allied has since received a subpoena from the U.S. attorney's office for the District of Columbia tied to phone records fraudulently obtained on Einhorn.

Allied declined to comment via a spokesman, as did Greenlight.

Short sellers' involvement aside, the BDC market is expected to grow, notes David Chiaverini, research analyst at BMO Capital Markets in New York, who tracks the BDCs.

"Driving that is the underlying growth of M&A activity. We're seeing some $200 billion of money being raised by PE funds within the past couple of years ... that's going to drive deal flow for BDCs as well," he notes.

Some of the most recent entrants include Kohlberg Capital (KCAP Quote), which back in December sold $216.5 million worth of shares via Lehman Brothers and Merrill Lynch, and GSC Investment (GNV Quote), which raised $109 million with lead underwriters Citi, J.P. Morgan and Wachovia. BMO also acted as co-managers on both offerings and is an active BDC underwriter.

American Capital has its own growth plans in sight. It hopes to take its show international and has opened offices in Frankfurt, Germany as well as Paris. It also hopes to soon enter the Asian markets, Wilkus says.

As its business has expanded, it also has become more sophisticated. American Capital plans on becoming a manager of collateralized loan obligations (a package of loans structured and sold off in pieces to investors), which will allow it to offload some of the debt it originates in its buyouts while also collecting management fees. Recently, it debuted a roughly $400 million CLO. Similarly, it has a number of investment funds, from which it collects management fees, Wilkus notes.