MW Business development companies' stocks have fallen. Some look attractive for the right type of investor.
By Philip van Doorn
Because of Blue Owl, concerns over private BDCs have spilled over to push down prices of publicly traded BDCs - many of which trade at large discounts to their reported asset valuations
Stocks of business development companies have been in a broad decline so far this year.
Amid the coverage of Blue Owl Capital's restriction on client redemptions from a business development company called Blue Owl Capital Corp. II, investors should take a quick step back to understand some nuances. There are big differences between private and public business development companies, or BDCs, and even similar names that can confuse the discussion.
Before digging into the details, keep in mind that BDCs are designed to provide a high level of current income to their shareholders. For some of these, the high income over the years has been pared with capital erosion for lackluster or even negative total returns (price changes plus dividends) over long periods. But for the best of the group, many of which are listed on the second table below, committed investors have been rewarded with high income and lucrative gains.
On the second list, below, of 10 BDCs trading above or slightly below their book values, five have beaten the S&P 500's SPX 10-year total return of 325%.
Investors in the stock market typically react broadly even when the immediate damage from a business trend doesn't affect an entire industry, or when a specific event has nuances that aren't easily summed up. Nearly all BDCs' stocks are down this year, in part because of fears of technological disruption, but also because of events tied to a BDC that isn't publicly traded.
Blue Owl Capital (OWL) is an asset-management firm that runs several business development companies. One of them is Blue Owl Capital Corp. II, which has been at the center of this week's news about a restriction on clients' ability to redeem their funds. The firm reported having $307 billion in assets under management as of Dec. 31.
A BDC typically lends money to small and midsized companies. These loans tend not to be secured by real estate and have high interest rates. The loans often come with an equity credit enhancement that ends up with the BDC owning a portion of the borrowing company. A BDC can leverage up to two times, meaning it can borrow up to triple the size of its balance sheet.
With the added leverage and high interest rates on loans to small and midsized companies, BDCs are typically considered to be income-oriented investments, although many have also served as long-term growth vehicles, as you can see below.
Blue Owl Capital Corp. (OBDC) is an example of a publicly traded BDC managed by Blue Owl Capital. But Blue Owl Capital Corp. II is a BDC that is not publicly traded.
The halt in client redemptions from Blue Owl Capital Corp. II led to former Pimco CEO Mohamed El-Erian expressing concern in a post on X about systemic risk. He also cited differing "approaches being taken by specific firms," which may refer to the methods by which alternative asset managers estimate the value of illiquid investments.
One cannot simply look up a price quote for an idiosyncratic loan for which there is no secondary market.
So there are a number of concerns for investors in private-equity funds and private BDCs:
-- If a fund or BDC's shares aren't publicly traded, one cannot simply press a button to sell the shares.
-- Private-equity funds and private BDCs will typically have restrictions on withdrawals, to avoid being forced to sell investments at unfavorable prices. This can be especially important when many of the investments are thinly or rarely traded.
-- There is no set way to mark illiquid assets to market. The best efforts of two asset managers may lead to different book values for similar assets. This can increase a private-equity or private-BDC investor's risk.
NAV discounts and premiums
A traditional open-ended mutual fund's share price is calculated once a day at the market close. This means adding up the market value of all of the fund's investments, plus its cash, as of the market close. That net asset value is then divided by the number of shares in the fund to arrive at the net asset value per share, which we will call the NAV.
An exchange-traded fund will calculate its NAV every day the same way. But since it is publicly traded on an exchange, the ETF will also have a share price that may match the NAV or trade a bit higher or lower than the NAV. A market maker at the exchange where the ETF is listed will decide whether or not the ETF should issue new shares or redeem shares, to keep the share price close to the NAV.
A privately traded BDC has a NAV, and when an investor decides to redeem shares (typically subject to volume and scheduling restrictions), this will be done at the most recently calculated NAV, which may be disclosed quarterly.
A publicly traded BDC has a daily share price and a NAV that is calculated and reported quarterly, and the share price can vary widely from that of the NAV. There is no market maker working to keep those two valuations in line.
Many BDCs' share prices have declined this year and last year. One concern among investors has been that software companies that have borrowed from BDCs might be high credit risks because of the threat to that industry from the deployment of generative artificial-intelligence technology.
But some of the declines could result from overreactions, because BDCs focus on various industries.
In a note to clients on Feb. 12, B. Riley analyst Sean-Paul Adams wrote: "While we do not dismiss idiosyncratic credit risk, we do not view SaaS/tech stress ... as the 'canary in the coal mine' for publicly traded BDC platforms."
Instead, he sees the recent declines in BDC shares as "as platform level derisking that has produced an outsized near-term value proposition in higher-quality vehicles now trading at discounted" valuations relative to NAV.
Adams includes Blue Owl Capital Corp. (OBDC) among these. He reiterated his "buy" rating for this BDC on Thursday, with a price target of $15; the stock closed at $11.43 that day. OBDC reported that its NAV was $14.81 as of Dec. 31. So the stock was trading at a 22.8% discount to NAV as of the close on Thursday.
NAV discount/premium screen
LSEG, a market-data firm, supplied a list of 45 BDCs with market capitalizations of at least $100 million. Of these, NAV figures were available for 42 of the BDCs, and all but six were trading at discounts to NAV as of Thursday's close.
These are the 10 BDCs from the list trading at the greatest discounts to their most recent reported NAVs, according to LSEG. The table also includes trailing dividend yields, as calculated by LSEG, and total returns that include reinvested dividends.
BDC Share-price discount to NAV Dividend yield 2026 return through Feb. 19 5-year return 10-year return BlackRock TCP Capital Corp. -45.8% 21.2% -13.7% -27% 14% WhiteHorse Finance Inc. -44.1% 15.7% -8.2% -15% 135% Cion Investment Corp. -42.3% 14.0% -9.3% 34% 34% FS KKR Capital Corp. -40.2% 21.3% -11.1% 43% 52% Runway Growth Finance Corp. -37.9% 16.6% -5.8% 13% 13% Triplepoint Venture Growth BDC Corp. -35.8% 16.3% -13.8% -23% 109% New Mountain Finance Corp. -32.3% 15.6% -11.0% 15% 95% Crescent Capital BDC Inc. -29.8% 12.4% -3.6% 45% 64% Blue Owl Technology Finance Corp. -29.0% 11.4% -15.3% -19% -19% Carlyle Secured Lending Inc. -28.8% 14.2% -6.8% 76% 92% Source: LSEG
And here are the 10 BDCs trading at the greatest premiums or smallest discounts to NAV. This group tends to have lower dividend yields than they heavily discounted group above, but also better long-term returns.
BDC Share-price premium or discount to NAV Dividend yield 2026 return through Feb. 19 5-year return 10-year return Main Street Capital Corp. 76.4% 5.4% -3.3% 142% 345% Capital Southwest Corp. 36.6% 11.2% 5.0% 88% 425% Hercules Capital Inc. 29.0% 12.0% -16.8% 73% 329% Trinity Capital Inc. 14.7% 13.4% 6.5% 104% 104% Sixth Street Specialty Lending Inc. 10.0% 10.7% -14.0% 47% 243% SuRo Capital Corp. 1.8% 5.3% -0.5% 21% 236%
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February 20, 2026 13:13 ET (18:13 GMT)
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