Index Designed to Measure Business Development Companies Focused on Private Debt
The Wilshire BDC Indexâ aims to measure the performance of debt-focused BDCs. BDCs are U.S. publicly traded companies that invest in small to mid-sized companies, in much the same way as do private equity and venture capital funds. Unlike a high yield portfolio, BDCs manage interest rate risk and are required to provide advice to the companies in which they invest. The new index leverages the intellectual capital of Wilshire Analytics, which is the technology foundation of Wilshire and creator of the Wilshire 5000®, the most comprehensive measure of the U.S. stock market. Inclusion in the Wilshire BDC Index is based on Wilshire Analytics’ proprietary research methodology.
“We are thrilled to introduce an index that tracks this specific component of the BDC market, which has often delivered yields several hundred basis points higher than REITs (real estate investment trusts), utilities and MLPs (master limited partnerships),” said Robert J. Waid, managing director of Wilshire Analytics, noting that the market value of BDCs was approximately $30 billion as of December 2013. “The Wilshire BDC Index provides a highly compelling measurement because it focuses on the performance of debt specialty firms that bridge the gap between equity and high yield private debt.
“Investors have been chasing yields in bonds and bank loans, as well as tax-advantaged equities, and the Wilshire BDC Index measures performance for investment instruments that seek to combine the best of both asset classes,” Waid added.
Fueled in large part by the expansion of the private equity industry in the early 1980s, BDCs have steadily gained momentum over time. According to a Wilshire study, the annualized growth rate for the past five years is more than 13 percent in terms of company count and more than 38 percent in market value.