New BDC ETF is a Pure Play on High Yield Income

Market Vectors ETF Trust just launched the Market Vectors BDC Income ETF (NYSE: BIZD), the first exchange-traded fund (ETF) designed to provide pure-play exposure to business development companies (BDCs).

BIZD is currently trading at $20.29 and will pay quarterly dividends and annual capital gains.  The initial dividend amount has not been announced yet but the index has a dividend yield of 7.6%.

Business development companies have traditionally been high-yielding, making them an attractive choice in today’s ongoing search for income.  Investing in BDCs provides exposure to private companies that many investors could not otherwise access, allowing for potential growth and yield generation.

The new ETF will try to reflect the performance of the Market Vectors U.S. Business Development Companies Index, which tracks U.S. publicly traded BDCs. The Index’s market capitalization break down includes mid-caps 49.4% and small-caps 50.6%. The underlying index also has an average weighted dividend yield of 7.60%.

To be eligible for the index, a BDC must also have a market capitalization in excess of $150 million, a three-month average daily trading volume of at least $1 million, and a minimum trading volume of 250,000 shares each month in the previous six months.

BIZD has 25 holdings and its top holdings include Ares Capital (ARCC) 16.0%, American Capital (ACAS) 14.8%, Prospect Capital (PSEC) 7.5%, Apollo Investment (AINV) 6.1% and Triangle Capital (TCAP) 4.9%.

BDCs’ principal business is to lend capital or provide services to privately-held companies or thinly-traded U.S. public companies. To qualify as a BDC, a company must be organized under the laws of, and have its principal place of business in the U.S.; be registered with the Securities and Exchange Commission; and have elected to be regulated as a BDC under the Investment Company Act of 1940 (“the 40 Act”).