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Should You Invest in the VanEck Vectors BDC Income ETF (BIZD)?

Zacks Equity Research

If you're interested in broad exposure to the Financials - BDCs/PE segment of the equity market, look no further than the VanEck Vectors BDC Income ETF (BIZD), a passively managed exchange traded fund launched on 02/11/2013.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Financials - BDCs/PE is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.

Index Details

The fund is sponsored by Van Eck. It has amassed assets over $200.63 M, making it one of the average sized ETFs attempting to match the performance of the Financials - BDCs/PE segment of the equity market. BIZD seeks to match the performance of the MVIS US Business Development Companies Index before fees and expenses.

The MVIS US Business Development Companies Index tracks the overall performance of publicly traded business development companies.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 9.41%, making it the most expensive product in the space.

It has a 12-month trailing dividend yield of 9.44%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Financials sector--about 100% of the portfolio.

Looking at individual holdings, Ares Capital Corp (ARCC) accounts for about 19.25% of total assets, followed by Fs Kkr Capital Corp (FSK) and Main Street Capital Corp (MAIN).

The top 10 holdings account for about 74.15% of total assets under management.

Performance and Risk

Year-to-date, the VanEck Vectors BDC Income ETF has added roughly 15.24% so far, and was up about 12.50% over the last 12 months (as of 02/06/2019). BIZD has traded between $14.04 and $17.40 in this past 52-week period.

The ETF has a beta of 0.85 and standard deviation of 11.27% for the trailing three-year period, making it a medium risk choice in the space. With about 25 holdings, it has more concentrated exposure than peers.

Alternatives

VanEck Vectors BDC Income ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, BIZD is a good option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

UBS ETRACS Linked to the Wells Fargo BDC Index ETN (BDCS) tracks Wells Fargo Business Development Company Index and the Invesco Global Listed Private Equity ETF (PSP) tracks Red Rocks Global Listed Private Equity Index. UBS ETRACS Linked to the Wells Fargo BDC Index ETN has $84.30 M in assets, Invesco Global Listed Private Equity ETF has $217.13 M. BDCS has an expense ratio of 0.85% and PSP charges 2.03%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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Invesco Global Listed Private Equity ETF (PSP): ETF Research Reports
 
Main Street Capital Corporation (MAIN) : Free Stock Analysis Report
 
FS Investment Corporation (FSK) : Free Stock Analysis Report
 
UBS ETRACS Linked to the Wells Fargo BDC Index ETN (BDCS): ETF Research Reports
 
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