In a nutshell, business development companies are the closest that ordinary investors can get to a private-equity investment. BDCs trade on public stock exchanges, but their main purpose is to create and manage portfolios of privately held investments. In many ways, this makes BDCs look like the private-investment equivalent of mutual funds or ETFs.
Because of BDCs' flexible nature, you have to truly understand and have confidence in what a business development company is doing before you invest in it. High yields may look attractive, but sometimes, you're bearing plenty of risk for which those sizable payouts have to compensate you. BDCs have unique risk attributes that aren't right for everyone. If you're comfortable with exposure to the tiny companies that tap BDCs for capital infusions, though, then buying into a business development company might be just the opportunity you're looking for.
Source: Motley Fool
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