BDCs vs. Private Credit Funds: Key Differences for Investors
February 02, 2026
Read Time 6 MIN
What Is a Business Development Company (BDC)?
A business development company (BDC) is a publicly regulated investment vehicle investment that helps small and mid-sized U.S. businesses get money when they cannot borrow from banks.. BDCs were approved under the Investment Company Act of 1940 and are designed to support economic growth while providing investors with access to private credit markets.
Publicly Traded vs. Non-Traded BDCs
Not all BDCs are the same from an investor experience perspective. Broadly, BDCs fall into two categories:
- Publicly traded BDCs trade on major stock exchanges and offer daily liquidity, transparent market pricing, and ongoing disclosure through regular financial reporting.
- Non-traded BDCs are not listed on exchanges, typically offer limited liquidity through periodic redemption programs, and rely on periodic net asset value (NAV) estimates rather than continuous market pricing.
When investors refer to BDCs in the context of liquidity, daily pricing, and ETF access, they are generally referring to publicly traded BDCs. These are also the types of BDCs accessed through exchange-traded funds such as the VanEck BDC Income ETF (BIZD).
How BDCs Work
BDCs collect money from investors and arrange it primarily into senior secured loans, subordinated debt, and sometimes equity investments of middle-market companies. To keep their special tax status, BDCs elect to be regulated investment companies (RICs), which requires them to distribute the majority of their taxable income to shareholders.
Because BDCs are regulated and publicly listed (in the case of traded BDCs), investors benefit from standardized disclosures, portfolio transparency, and market-driven pricing.
Key Characteristics of BDCs
- Focus on lending to U.S. middle-market companies
- High income orientation due to required distributions
- Publicly traded BDCs offer daily liquidity and transparent pricing
- Subject to regulatory oversight and leverage limits
- Income typically taxed as ordinary income
What Are Private Credit Funds?
Private credit funds are investment vehicles that lend money directly to private companies, often supported by private equity firms. These funds operate outside of public markets and are typically structured as private partnerships.
How Private Credit Funds Operate
Private credit funds raise capital from institutional investors and high-net-worth individuals. The money is usually committed for several years and used slowly over time as investment opportunities arise. In exchange, investors receive periodic income and eventual return of capital as loans mature or are refinanced.
Unlike publicly traded vehicles, private credit funds generally do not offer daily liquidity and may restrict withdrawals entirely during the life of the fund.
Key Characteristics of Private Credit Funds
- Limited access, often restricted to accredited or institutional investors
- Long lock-up periods with limited or no interim liquidity
- Valuations based on periodic NAV estimates
- Less frequent public disclosure
- Potentially higher yields, but with reduced flexibility
BDCs vs. Private Credit Funds: Key Differences
| Feature | Publicly Traded BDCs | Private Credit Funds |
| Investor Access | Broad retail and institutional access | Typically accredited or institutional only |
| Liquidity | Daily liquidity via stock exchanges | Limited or no liquidity |
| Regulation | SEC-regulated | Less standardized |
| Pricing | Market-based, real-time pricing | Periodic NAV estimates |
| Transparency | Regular public reporting | Limited public disclosure |
| Investment Structure | Public company / RIC | Private partnership |
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Yield, Risk, and Volatility Considerations of BDCs
Both BDCs and private credit funds are designed to generate income, but the investor experience can differ meaningfully.
Income Potential of BDCs
BDCs often offer attractive yields primarily because they lend to smaller, less-established companies that command higher credit spreads as compensation for increased credit risk. While many BDC loans are floating rate, which has boosted income in higher-rate environments, the underlying driver of yield is the elevated spread above base rates earned on middle-market credit. Private credit funds may target similar or higher headline yields, but those returns are often tied to longer holding periods, less frequent pricing, and reduced liquidity.
Risk Factors to Consider with BDCs
Key risks across both structures include credit risk, economic sensitivity, borrower defaults, and interest rate risk related to the floating-rate nature of most private credit loans. While floating-rate structures can increase income when rates rise, they may also lead to declining income and loan repricing pressures if base rates fall. Publicly traded BDCs may also experience market price volatility, particularly during periods of broader equity market stress. However, diversification through an ETF structure can help mitigate single-issuer risk.
How Investors Can Access BDCs and Private Credit Through ETFs
Exchange-traded funds have expanded access to income-oriented strategies by offering diversified exposure, daily liquidity, and operational simplicity.
Accessing BDCs with the VanEck BDC Income ETF (BIZD)
The VanEck BDC Income ETF (BIZD) provides diversified exposure to publicly traded BDCs in a single, liquid vehicle. By focusing on exchange-listed public BDCs, BIZD allows investors to access private credit-oriented income streams while maintaining daily liquidity, real-time market pricing, and ease of trading.
For investors seeking income from middle-market lending without the lock-ups and access limitations of private funds, BIZD may serve as a practical solution.
The VanEck BDC Income ETF (BIZD) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS®US Business Development Companies Index (MVBDCTRG), which tracks the overall performance of publicly traded business development companies.
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Accessing Alternative Asset Managers with the VanEck Alternative Asset Manager ETF (GPZ)
The VanEck Alternative Asset Manager ETF (GPZ) provides exposure to the publicly traded equity of alternative asset management companies. Rather than offering direct or income-focused exposure to private credit, GPZ is designed to give investors a public, liquid, and indirect way to participate in the growth of private markets more broadly.
The companies held in GPZ typically earn management fees and performance-based revenues across a range of alternative strategies, including private equity, private credit, real assets, and other non-traditional investments. As a result, GPZ is better viewed as a growth-oriented complement to alternative income strategies, rather than a yield-focused solution.
The VanEck Alternative Asset Manager ETF (GPZ) seeks to track as closely as possible, before fees and expenses, the price and yield performance of the MarketVector Alternative Asset Managers Index (MVAALTTR), which is intended to track the overall performance of alternative asset managers across private equity, venture capital, private credit, private real estate, and private infrastructure.
BDCs vs. Private Credit: Which May Be Right for Investors?
BDCs May Appeal To:
- Investors seeking high income with daily liquidity
- Those who value transparency and public market access
- Investors using ETFs as part of a diversified income strategy
Private Credit Funds May Appeal To:
- Investors able to commit capital for longer periods
- Those comfortable with limited liquidity
- Institutional or accredited investors seeking bespoke structures
Complementary Approaches to Private Lending
BDCs and private credit funds are not mutually exclusive. In fact, they can serve complementary roles within a broader income-focused portfolio. Publicly traded BDCs offer liquidity and transparency, while private credit funds may provide longer-term, less liquid exposure for investors with appropriate time horizons.
For many investors, ETFs that focus on publicly traded BDCs can help bridge the gap, providing access to private lending markets with the flexibility of public markets.
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IMPORTANT DISCLOSURE
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its employees.
An investment in VanEck Alternative Asset Manager ETF may be subject to risks which include, among others, risks related to investing in alternative asset managers, issuer-specific changes, financials sector, equity securities, small-, medium and large-capitalization companies, depositary receipts, special risk considerations of investing in Canadian and European issuers, foreign securities, foreign currency, market, operational, index tracking, authorized participant concentration, new fund, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount, liquidity of fund shares, non-diversified and index-related concentration risks, all of which may adversely affect the Fund. Investing in listed alternative asset managers may be speculative and involve substantial risks, including leverage, liquidity, significant volatility, operational complexity, valuation, limited public information, and the risk of borrower default or bankruptcy. Small, medium and large-capitalization companies may be subject to elevated risks.
Business Development Companies (BDCs) generally invest in less mature U.S. private companies or thinly traded U.S. public companies which involve greater risk than well-established publicly-traded companies. While the BDCs that comprise the Index are expected to generate income in the form of dividends, certain BDCs during certain periods of time may not generate such income. The Fund will indirectly bear its proportionate share of any management fees and other operating expenses incurred by the BDCs and of any performance-based or incentive fees payable by the BDCs in which it invests, in addition to the expenses paid by the Fund. A BDC’s incentive fee may be very high, vary from year to year and be payable even if the value of the BDC’s portfolio declines in a given time period. Incentive fees may create an incentive for a BDC’s manager to make investments that are risky or more speculative than would be the case in the absence of such compensation arrangements, and may also encourage the BDC’s manager to use leverage to increase the return on the BDC’s investments. The use of leverage by BDCs magnifies gains and losses on amounts invested and increases the risks associated with investing in BDCs. A BDC may make investments with a larger amount of risk of volatility and loss of principal than other investment options and may also be highly speculative and aggressive. The Fund and its affiliates may not own in excess of 25% of a BDC's outstanding voting securities which may limit the Fund's ability to fully replicate its index. An investment in the Fund may be subject to risks which include, among others, investing in BDCs, investment restrictions, financial sector, small- and medium-capitalization companies, equity securities, derivatives, derivatives counterparty, liquidity risk related to swap agreements, floating rate risk for BDCs, market, operational, regulatory, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, issuer-specific changes, and index-related concentration risks, all of which may adversely affect the fund. Small- and medium-capitalization companies may be subject to elevated risks.
MarketVector Alternative Asset Managers Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Securities Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Alternative Asset Manager ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.
MVIS US Business Development Companies Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Securities Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck BDC Income ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com/etfs. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
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IMPORTANT DISCLOSURE
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its employees.
An investment in VanEck Alternative Asset Manager ETF may be subject to risks which include, among others, risks related to investing in alternative asset managers, issuer-specific changes, financials sector, equity securities, small-, medium and large-capitalization companies, depositary receipts, special risk considerations of investing in Canadian and European issuers, foreign securities, foreign currency, market, operational, index tracking, authorized participant concentration, new fund, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount, liquidity of fund shares, non-diversified and index-related concentration risks, all of which may adversely affect the Fund. Investing in listed alternative asset managers may be speculative and involve substantial risks, including leverage, liquidity, significant volatility, operational complexity, valuation, limited public information, and the risk of borrower default or bankruptcy. Small, medium and large-capitalization companies may be subject to elevated risks.
Business Development Companies (BDCs) generally invest in less mature U.S. private companies or thinly traded U.S. public companies which involve greater risk than well-established publicly-traded companies. While the BDCs that comprise the Index are expected to generate income in the form of dividends, certain BDCs during certain periods of time may not generate such income. The Fund will indirectly bear its proportionate share of any management fees and other operating expenses incurred by the BDCs and of any performance-based or incentive fees payable by the BDCs in which it invests, in addition to the expenses paid by the Fund. A BDC’s incentive fee may be very high, vary from year to year and be payable even if the value of the BDC’s portfolio declines in a given time period. Incentive fees may create an incentive for a BDC’s manager to make investments that are risky or more speculative than would be the case in the absence of such compensation arrangements, and may also encourage the BDC’s manager to use leverage to increase the return on the BDC’s investments. The use of leverage by BDCs magnifies gains and losses on amounts invested and increases the risks associated with investing in BDCs. A BDC may make investments with a larger amount of risk of volatility and loss of principal than other investment options and may also be highly speculative and aggressive. The Fund and its affiliates may not own in excess of 25% of a BDC's outstanding voting securities which may limit the Fund's ability to fully replicate its index. An investment in the Fund may be subject to risks which include, among others, investing in BDCs, investment restrictions, financial sector, small- and medium-capitalization companies, equity securities, derivatives, derivatives counterparty, liquidity risk related to swap agreements, floating rate risk for BDCs, market, operational, regulatory, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, issuer-specific changes, and index-related concentration risks, all of which may adversely affect the fund. Small- and medium-capitalization companies may be subject to elevated risks.
MarketVector Alternative Asset Managers Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Securities Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Alternative Asset Manager ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.
MVIS US Business Development Companies Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Securities Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck BDC Income ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com/etfs. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.