Weekly Market Summary

Extra Credit^*

• Business development companies (BDCs) portfolios typically maintain a sleeve of more liquid assets within their portfolios to help meet potential redemption requests. These allocations are often in the form of Level 1 and Level 2 holdings that can be readily sold. Given the inefficiency of holding lower‑yielding assets, BDCs commonly invest this liquid sleeve in broadly syndicated leveraged loans. Within the more than $500 billion BDC universe, approximately $17.6 billion of exposure to syndicated loans was identified as of 4Q25, representing just over 3% of total fair value. Public BDCs account for roughly $2.2 billion of these positions, or about 12% of total BDC holdings in syndicated loans. Approximately $2.5 billion, or 14%, of this exposure is in second‑lien loans, with the remainder in first‑lien structures. Given the relatively small size of the second‑lien syndicated loan market, BDCs represent an estimated 10% of the investor base in that segment as of year‑end 2025.
• BDCs have several tools available to generate liquidity in order to meet redemption requests, including the sale of more liquid assets held on their balance sheets. According to Barclays, investors in the broadly syndicated loan (BSL) market should not be overly concerned about the risk of large-scale BSL sales from BDCs in the near term. That said, it remains important to monitor the sectors and issuers where BDCs have exposure, as any sales of these liquid holdings could influence technical flows within specific parts of the market.
• The latest U.S. Private Credit Monitor shows a shift in sector mix, with healthcare accounting for 22% of direct lending issuance year to date through March, up from 18% in 2025, while technology’s share declined to 14% from 18%. More broadly, direct lending volume increased quarter over quarter and rose 26% year over year, driven by larger deal sizes even as overall deal count lagged last year’s levels. In the first quarter, direct lenders executed more takeouts of broadly syndicated loan deals than the reverse, although the gap narrowed significantly compared to the prior quarter.

Reuters and Pitchbook LCD as of 4/15/2026. BDCs are a type of closed-end investment fund that invests in small- and mid-sized private companies, or distressed public firms. Created by Congress, they enable retail investors to access private credit/equity markets and typically offer high dividend yields by financing business growth.

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