Business Development Companies (BDCs) are emerging as a preferred vehicle for private credit exposure, according to a new report from investment ratings firm RSMR. The firm highlights BDCs’ strong dividend yields, liquidity, and diversification benefits as key advantages for income-focused and multi-asset investors alike. 

“A major attraction of BDCs is their high dividend payouts, which have ranged between 8% and 20% over the last decade,” RSMR noted. “This feature makes them an appealing option for income‑focused investors.” 

The report underscores the benefits of listed BDCs, which trade on public exchanges, offering daily liquidity—unlike traditional private credit or non-traded BDCs. This access allows investors to sidestep the illiquidity challenges often associated with direct investments in private debt or equity. 

In terms of risk management, RSMR emphasizes that most BDCs invest across a diversified pool of private companies spanning multiple industries, helping reduce idiosyncratic risk. However, the report cautions that BDCs are “not without risk” and require a “selective, bottom-up approach” to identify high-quality opportunities. 

“When choosing BDCs, we focus on credit quality and quality of management,” the firm said, “aiming to exclude entities likely to struggle with loan growth or lending discipline.” 

RSMR also points out that private credit, when integrated thoughtfully into a multi-asset portfolio, can enhance yield and diversification without meaningfully increasing volatility. “Combining bottom-up credit selection with top-down asset allocation helps to mitigate the risks associated with private credit,” the report concluded.