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Capital Southwest (CSWC) sparked an enthusiastic discussion in the comments section of an article about Compass Diversified Holdings (CODI). Capital Southwest is an investment firm that provides equity capital to small and medium-sized businesses. Where Compass Diversified is not a BDC (business development company) but operates like one, Capital Southwest has been regulated as a BDC since 1988. Where Compass Diversified purchases controlling interests in the businesses in which it invests, Capital Southwest more often limits its investments to only a 20%-45% minority interest. Both firms provide follow-on financing to the businesses.

Another significant difference in the two investment firms exists in the investment reach. Compass Diversified has just 8 investments - 4 companies with...

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