2 Sky-High Yielders Poised to Bite and a 9% Payer That Stays Steady

Core Viewpoint - The bankruptcy of auto-parts supplier First Brands has raised concerns about business development companies (BDCs), which provide loans to small and mid-sized firms, leading to potential investment opportunities but also risks associated with high yields [1][2]. Group 1: Market Concerns - The bankruptcy of First Brands has triggered worries about the private-credit market where BDCs operate, with JPMorgan Chase CEO Jamie Dimon suggesting there may be more issues in the sector [2]. - BDCs are known for offering double-digit yields, attracting investors despite the recent market turmoil [3]. Group 2: Specific BDC Analysis - Blue Owl Capital (OBDC) is highlighted as a BDC with high fees, including a 1.5% base management fee and 17.5% of net investment income, which raises concerns about its attractiveness as an investment [5][6]. - OBDC has not outperformed the BDC market since its IPO in 2019, indicating that it may not be a bargain despite the current dip [7]. - Prospect Capital Corporation (PSEC) is noted for being the cheapest BDC on the market at a 60% discount to NAV, but its long-term return of 7% over the last decade and a 20.9% current yield are seen as warning signs [8][10]. Group 3: Alternative Investment Opportunities - The Liberty All-Star Growth Fund (ASG) is presented as a more favorable investment option, having outperformed BDCs with a 175% total return over the last decade and offering a 9% dividend [12]. - ASG's portfolio includes major companies like NVIDIA, Microsoft, and Apple, and it commits to paying about 8% of NAV as dividends yearly, providing some predictability [13]. - With ASG trading at an 11.2% discount to NAV, it is suggested as a safer alternative to the risks associated with BDCs like PSEC and OBDC [14].