The Federal Reserve’s slowing approach to rate hikes is a big positive for firms that practice financial wizardry. Fed Chair Janet Yellen told The Economic Club of New York earlier this week that she considered it “appropriate for the Committee to proceed cautiously in adjusting policy.” Translation – they’re going to keep moving slowly. Inflation isn’t yet in the picture, and until it is, the Fed can keep rates low for longer than most think. And that’s bullish for business development companies, or BDCs.
BDCs started sliding downward last summer on interest rate fears and got finished off when oil prices plunged. Some of these firms had loans outstanding to energy firms, and investors fretted they wouldn’t get repaid. While these concerns might be valid, not all BDCs have high exposure to energy, making those that got swept up in the hysteria for no good reason interesting issues today: Ares Capital Corporation (ARCC), Apollo Investment Corp. (AINV) and Prospect Capital Corporation (PSEC).
Source: InvestorPlace
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