BDC stocks had one of their best years in 2016 after two years of lagging performance in 2014 and 2015. This “make up” year included some bad breaks for some BDC shareholders, but BDCs that avoided the worst credit issues generally returned more than 20% from share price appreciation and dividends.
BDC ETF and ETN Performance:
- BDCS – Tracks a Wells Fargo index of BDCs, and returned 23.09% including dividends in 2016.
- BDCL – A 2x levered fund, this ETN will produce roughly two times the gain or loss of BDCS. This year, it returned 48.66% including dividends.
- BIZD – The only ETF for the sector, this Market Vectors BDC ETF tracks the industry by market capitalization. It returned 25.36% this year, including dividends.
Good year for senior loan funds
Senior loan funds performed excellently in 2016. Not to be left out of the rally, even unlevered index ETFs like BKLN returned 8.9% in 2016, spectacular performance compared to 2.65% for the Barclays U.S. Aggregate Bond Index.
Bank loan funds as a category returned about 9.2% in 2016, certainly helped by a reversal in prices vs. par, as well as a year-end 2016 rally as some investors rotated into floating-rate funds to lower duration and make more money from rising interest rates.
Banner years like these are rare. The excellent performance of 2016 provided something of a “catch up” for weak sector performance in 2014 and 2015.