3.8.  Business Development Companies

A business development company (BDC) is a closed-end investment company that is created with the purpose of investing in small, developing companies. BDCs allow non-accredited investors to invest in private, emerging growth companies. A BDC may invest in either equity or debt securities, although debt is more typical. BDC investments offer income and the possibility of appreciation and capital gain. BDCs can offer higher returns than other investment companies, but they come with greater risk.

BDC investors are exposed to the following risks:

• Default (credit) risk – portfolio companies may be struggling financially and default on their loans or go bankrupt

• Interest rate risk – debt investments within the fund lose value if interest rates rise.

• Liquidity r