Market Vectors ETF Trust today launched the Market Vectors BDC Income ETF (NYSE Arca: BIZD), the first exchange-traded fund (ETF) designed to provide pure-play exposure to business development companies (BDCs).
“Business development companies have traditionally been high-yielding, making them an attractive choice in today’s ongoing search for income,” said Brandon Rakszawski, product manager for Market Vectors ETFs. “Investing in BDCs provides exposure to private companies that many investors could not otherwise access, allowing for potential growth and yield generation.”
BDCs’ principal business is to lend capital or provide services to privately-held companies or thinly-traded U.S. public companies. To qualify as a BDC, a company must be organized under the laws of, and have its principal place of business in the U.S.; be registered with the Securities and Exchange Commission; and have elected to be regulated as a BDC under the Investment Company Act of 1940 (“the 40 Act”).
BIZD seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors US Business Development Companies Index (MVBIZDTG), a rules-based index intended to track the overall performance of publicly traded business development companies. To be eligible for the index, a BDC must also have a market capitalization in excess of $150 million, a three-month average daily trading volume of at least $1 million, and a minimum trading volume of 250,000 shares each month in the previous six months.Market Vectors notes that an investment of this kind is not without risks. BDCs invest in private companies and thinly traded securities of public companies, including the debt instruments of such companies, making them potentially susceptible to issues arising out of bankruptcies or defaults. Additionally, limitations on asset mix and leverage may make it difficult for BDCs to raise capital and BDCs may be more adversely affected by market volatility than more diversified investments.