Publicly traded private credit vehicles are drawing renewed investor interest as valuations recover from recent lows, with some market participants targeting discounted entry points, according to a report by Bloomberg.
Shares in listed business development companies (BDCs) fell to their weakest levels since 2022 in March, amid concerns over exposure to software-related lending and broader pressure on private credit. Sentiment was also hit by significant redemption requests – exceeding $15bn – from investors in non-listed funds, prompting a spillover effect into public markets.
Since then, demand has picked up, pushing price-to-book ratios closer to historical norms. The Cliffwater BDC Index has risen 2.4% over the past month, supported in part by a broader improvement in global risk appetite.
Attention is now turning to upcoming earnings, which are expected to provide greater clarity on portfolio performance and credit quality. Ares Capital Corporation is set to report first, followed by peers backed by major asset managers including Blue Owl Capital, BlackRock and Blackstone.
Market participants are closely watching for signs of valuation pressure, particularly within software-focused investments, where widening spreads may lead to markdowns and weigh on net asset values.
A relative value trade has also emerged, with some investors rotating out of non-listed BDCs – where redemptions are typically processed at net asset value – and into listed equivalents trading at discounts. This dynamic has driven inflows into exchange-traded strategies focused on the sector.
However, not all investors are convinced the recovery has further to run. Uncertainty around potential credit losses, especially in software-linked lending – which accounts for a meaningful share of portfolios – continues to weigh on sentiment. Some market participants argue that yields available in investment-grade and high-yield bonds may offer more attractive risk-adjusted returns.
