VanEck's Unique BDC Income ETF Yields 12%

"BIZD holds 29 individual BDCs plus total return swaps representing 34% of the portfolio. These synthetic positions provide leveraged exposure to BDC indexes while paying SOFR plus 85 basis points on the borrowed amount, amplifying returns in both directions. The fund concentrates heavily in its top holdings. Ares Capital commands 15.5% of the portfolio, Blue Owl Capital 9.4%, and Blackstone Secured Lending 8.1%."

"BIZD generates its 12% yield from underlying BDC dividends, which come from interest income on middle-market loans. Most BDCs hold floating-rate debt, meaning income adjusts with interest rates. That provided a tailwind when rates rose but creates uncertainty as the Federal Reserve considers cuts. Recent performance tells a cautionary story. The fund is down 8% year-to-date while the S&P 500 has gained 17%. Over the past decade, BIZD returned 143% compared to the S&P's 244%."

The ETF packages exposure to 29 BDCs alongside total return swaps that represent 34% of assets, creating synthetic leveraged exposure while paying SOFR plus 85 basis points. Top holdings are highly concentrated, with Ares Capital, Blue Owl and Blackstone comprising a large share and the top four exposures making up roughly two-thirds of assets. Dividends derive from interest on middle-market, mostly floating-rate loans, so income adjusts with interest rates. The fund has shown uneven performance, lagging major indexes year-to-date and over the past decade, while quarterly dividends have varied. The headline expense ratio is low, but swap costs add implicit fees.

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