BDC Market Weekly Review: Sector Valuation Moves Back To Pre-COVID Levels

Oct. 23, 2021 7:47 AM ET, , , , 11 Comments

Summary

  • We take a look at the action in BDCs through the third week of October and highlight some of the key themes we are watching.
  • BDCs continued to rally this month with average valuations moving back to their pre-COVID levels.
  • We don't expect the same run-rate of NAV increases as we have seen in the last few quarters due to flat equities, wider credit spreads and a reversal of writedowns.
  • We revisit the sensitivity of NII to rate increases and highlight two key takeaways for investors of individual BDC due diligence and BDC loan structure.
  • The BDC stance in our Income Portfolios remains on attractively valued companies with a history of strong and consistent NAV returns that also feature NII tailwinds.
  • I do much more than just articles at Systematic Income: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

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This article was first released to Systematic Income subscribers and free trials on Oct. 16.

Welcome to another installment of our BDC Market Weekly Review where we discuss market activity in the Business Development Company

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This article was written by

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ADS Analytics is a team of analysts with experience in research and trading departments at several industry-leading global investment banks. They focus on generating income ideas from a range of security types including: CEFs, ETFs and mutual funds, BDCs as well as individual preferred stocks and baby bonds.

ADS Analytics runs the investing group Systematic Income which features 3 different portfolios for a range of yield targets as well interactive tools for investors, daily updates and a vibrant community.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of TCPC, PNNT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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