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BDC-Business Development Companies

LPL Financial Research is pleased to present this educational primer on business development companies (BDCs). As investors search for income opportunities, BDCs are becoming an increasingly discussed investment vehicle. This primer will explore the opportunities that BDCs can offer, while keeping in mind the related risks that are involved with the product. Before delving into some of the specifics of BDC portfolios and how they compare to a few other investment vehicles, we discuss how they function, their focus, and their structure.

In order to better understand exactly what BDCs are holding in their portfolios, we discuss a few of the more important aspects of their individual investments. The relevant risks to both BDCs and the non-traded structure will also be touched on.

A comparison to non-traded real-estate investment trusts (REITs), bank loan funds, and high-yield bond funds is also included. Finally, we go over important questions to consider when evaluating BDCs.

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