Peter Cecchini, Director of Research at Axonic Capital, appeared on Bloomberg’s Real Yield with host Katie Greifeld to explain his negative stance on Business Development Companies, a sector many investors have gravitated toward for its high income potential.
Cecchini confirmed he is “not constructive” on BDCs, pushing back on the conventional appeal of their dividend yields, which often run above 10%. His argument: those yields do not adequately account for the rising risk of principal loss. With sticky inflation keeping rates elevated, he views BDCs as priced for an economic outcome that is looking increasingly unlikely.
He also noted that widening in other areas of structured credit presents a more attractive risk-reward profile than BDCs currently offer, suggesting he sees better opportunities elsewhere in credit markets without taking on what he views as mispriced risk.
Axonic’s research continues to monitor credit quality and liquidity conditions across private credit markets as macroeconomic pressures on leveraged borrowers intensify.
Watch the full segment here.