BDCs Emerge as a High-Yield Haven as Private Credit Shifts

Key Takeaways:

• Investors facing losses in individual BDC holdings may use tax loss harvesting to reset cost basis without stepping away from high yield private credit exposure.
• BDCs continue to outyield many traditional income categories, supported by lending to smaller private companies at higher interest rates.
• Despite short term volatility, private credit remains supported by strong demand and disciplined underwriting, keeping long term income potential in focus.

As investors search for income beyond traditional bonds, private credit has emerged as a resilient alternative. Business Development Companies (BDCs) provide access to this growing market, offering yields that often exceed those of conventional income sources. VanEck’s BDC Income ETF (BIZD) offers a diversified, liquid way to invest across the BDC universe, helping investors stay positioned for income opportunities as market conditions evolve.

High Yield Potential in a Diversified Package

One of the most compelling reasons investors turn to BIZD is its consistent high yield potential relative to other income-oriented investments. Many BDCs generate substantial income that often exceeds yields available in other income oriented assets such as investment grade bonds, high yield bonds, utilities, or dividend paying stocks.

BIZD provides a single ticker with diversified exposure to this high income segment of private credit, while reducing the company specific risks of holding a single BDC.

Yield Comparison Across Income Opportunities

Source: FactSet and ICE Data Indices as of 10/31/2025. Past performance is no guarantee of future results. Yield for BDCs, Equity REITs, Utilities Stocks, and U.S. Stocks represented by dividend yield. Yield for U.S. HY Bonds, U.S. IG Bonds, and 10 Yr Treasury represented by yield-to-worst. BDCs represented by MVIS US Business Development Companies Index; U.S. HY Bonds represented by ICE BofA US High Yield Index; U.S. IG Bonds represented by ICE BofA U.S. Corporate Index; Equity REITs represented by FTSE NAREIT All Equity REITs Index; Utilities Stocks represented by S&P Utilities Index; U.S. Stocks represented by S&P 500 Index; U.S. 10 Yr Treasury represented by ICE BofA Current 10-Year US Treasury Index.

The Broader Case for Private Credit and BDCs

Private credit has gained significant traction as investors seek yield and diversification away from traditional bonds. BDCs, which provide financing to small and mid-sized U.S. businesses, play a crucial role in this growing ecosystem. While BDCs and other private credit vehicles have historically benefited from floating-rate structures during periods of rising interest rates, these same floating-rate exposures can also serve as a valuable diversifier alongside traditional fixed-rate bond holdings as the rate environment evolves going forward.

Despite short-term fluctuations, the long-term fundamentals of private credit remain strong, driven by growing demand for alternative financing and disciplined underwriting across many BDCs. Additionally, the structural shift in capital markets underscores how private credit continues to gain share from traditional high yield.

Private Credit Continues to Take Share From High Yield Bonds

Source: Man Group, Private Credit: Dispelling the Myths; PitchBook, as of June 2024.

Turning Market Pullbacks into Opportunity

Market pullbacks can be unsettling, but they often create opportunities, especially for investors using tax-loss harvesting as part of their year-end or ongoing portfolio strategy. As private credit continues to expand as an asset class, business development companies (BDCs) have emerged as a unique, income generating way to access this market.

Recent volatility in BDCs has pushed prices lower, and the BDC industry, in aggregate, now trades below its long-term average price-to-book ratio for the first time in several years. For some investors, that means unrealized losses in individual BDC holdings. Rather than viewing these losses as setbacks, investors can potentially turn them into a tax advantage, and stay invested in the sector’s long-term growth story by reallocating to a diversified, high-yield vehicle like BIZD.

BDCs Now Trade Below Their Long-Term Average Valuation

Source: FactSet as of 11/19/2025. BDCs represented by MVIS US Business Development Companies Index; A weighted harmonic average is used to calculate Price-to-book; Index data prior to June 19, 2023 reflects that of MarketVector US Business Development Companies Liquid Index (MVBIZDTG). From June 19, 2023 forward, the index data reflects that of the MVIS US Business Development Companies Index (MVBDCTRG). Index history which includes periods prior to June 19, 2023 links the performance of MVBIZDTG and MVBDCTRG and is not intended for third party use. Past performance is no guarantee of future results. See important disclosures and index descriptions at end.

The Benefits of a Diversified BDC Investment Approach

VanEck’s BDC Income ETF (BIZD) provides broad exposure to publicly traded BDCs through a single liquid ticker. This helps solve several structural challenges of investing directly in individual private credit vehicles.

Key potential benefits of using BIZD for BDC exposure:

• Diversified exposure across many BDCs rather than single name concentration
• High income potential relative to traditional fixed income categories
• Daily liquidity and transparency
• Ease of access through the ETF wrapper
• Potential ability to remain invested in private credit while harvesting tax losses elsewhere

For investors who want to stay in the income producing private credit space but reduce single company risk or reset tax basis, BIZD may provide an efficient solution.