Van Eck's Market Vectors unit, the fifth-largest U.S. ETF issuer, today introduced the Market Vectors BDC Income ETF (NYSE: BIZD), a fund the firm says is the first designed to offer pure-play exposure to high-yielding business development companies.
With an annual expense ratio 0.4 percent, BIZD tracks the Market Vectors US Business Development Companies Index (MVBIZDTG), a rules-based index that tracks the performance of publicly traded business development firms.
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"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," according to a statement issued by Market Vectors.
Acquired fund fees and other expenses work out to 7.16 percent on an annual basis, but investors will not absorb those costs. Rather, those costs will be seen in the prices of the new ETF's 25 constituents.
BIDZ comes to market at a time when investors' thirst for dividends and robust yields remain high. With an average weighted dividend yield of 7.6 percent, BIDZ appears to be an ETF to consider for the income-minded investor, but not one that is risk-free.
"Market Vectors notes that an investment of this kind is not without risks. BDCs invest in private companies and thinly traded securities of public companies, including the debt instruments of such companies, making them potentially susceptible to issues arising out of bankruptcies or defaults. Additionally, limitations on asset mix and leverage may make it difficult for BDCs to raise capital and BDCs may be more adversely affected by market volatility than more diversified investments," said Market Vectors in the statement.
About half of the holdings in BIDZ have market values ranging from $1 billion to $5 billion while the other half are valued at less than $1 billion. Ares Capital (NASDAQ:ARCC) is the new ETF's largest holding with a weight of almost 16 percent while American Capital (NASDAQ:ACAS) is next at 14.8 percent.
Other top-10 holdings include Prospect Capital (NASDAQ:PSEC), Apollo Investment (NASDAQ:AINV), Fifth Street Finance (NASDAQ:FSC) and Solar Capital (NASDAQ:SLRC). Overall, the top-10 holdings in BIDZ account for just over 72 percent of the ETF's weight.
"Business development companies have traditionally been high-yielding, making them an attractive choice in today's ongoing search for income," said Brandon Rakszawski, product manager for Market Vectors ETFs, in the statement. "Investing in BDCs provides exposure to private companies that many investors could not otherwise access, allowing for potential growth and yield generation."
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