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Wilshire launches index to track business development companies
New York, Jan. 7 – Wilshire Associates Inc. announced the launch of its new Business Development Co. index.
The measure aims to track the performance of debt-focused business development companies, publicly traded companies that invest in small to mid-sized companies.
“We are thrilled to introduce an index that tracks this specific component of the BDC market, which has often delivered yields several hundred basis points higher than REITs (real estate investment trusts), utilities and MLPs (master limited partnerships),” said Robert J. Waid, managing director of Wilshire Analytics, in a news release.
“The Wilshire BDC Index provides a highly compelling measurement because it focuses on the performance of debt specialty firms that bridge the gap between equity and high yield private debt.
“Investors have been chasing yields in bonds and bank loans, as well as tax-advantaged equities, and the Wilshire BDC Index measures performance for investment instruments that seek to combine the best of both asset classes.”
Wilshire noted that business development companies manage interest rate risk and are required to provide advice to the companies in which they invest.
The top five components of the index as of Dec. 31 are Ares Capital Corp. with a 23% weight, Prospect Capital Corp. with a 14% weight, Apollo Investment Corp. with an 8% weight, Main Street Capital Corp. with a 7% weight and Fifth Street Finance Corp. with a 6% weight.
There were 31 members of the index as of Dec. 31.
For inclusion, companies must have a market capitalization of at least $100 million and 75% of their investments must be in debt. Members are removed if the market capitalization falls below $50 million for two consecutive quarters.
Wilshire said the number of business development companies has grown 13% a year over the past five years and the market value has increased 38% a year.
Wilshire is a Santa Monica, Calif. Investment consulting and services company.
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