The company invests in companies that are centered around BDCs, or Business Development Companies. They issue financing to private mid-sized businesses.
I generally tend to avoid these types of companies, however I did have exposure to this in a way through Alaris Equity Partners. AD.UN is not necessarily a BDC company but it does issue capital to medium sized US businesses and in return gets a distribution from the businesses.
The one thing about these companies, especially if they take equity positions in the small to medium businesses, is valuation. Valuing private companies is extremely complex and speculative in nature. So the value of the underlying companies that PBDC holds is very hard to justify/quantify.
There is also the added risk that the private companies are more susceptible to defaulting on their loans or even going out of business than say a publicly traded corporation.
It seems like a reasonable fund, but I do believe there are added risks here. I would have loved to see how this fund performed during the COVID drawdown, financial crisis, or even possibly the 2022 bear market but it just started during the bull market in late 2022/2023.
To give you an idea of how hard a fund like this would be hit during any sort of crisis, however, we can look to its top holding in Ares Capital. During the financial crisis, it fell by 83%. During the COVID crash, it fell more than 45%.
I think the draw for many investors to these funds that invest in BDC companies is the higher yields. And if the economy continues to chug along fine, I think these funds will be fine. But any sort of material economic event, and these would be prone to significant drawdowns.