First Quarter Non-traded BDC Sales Slump 39%
Sales of non-traded business development companies took a hit in the first quarter of 2016, according to data compiled by Robert A. Stanger & Co. BDC sales topped out at $467.6 million for the quarter, a 39.4 percent drop from last quarter.
There was a slight downward trend in BDC capital raising activity in the first two months of the year, with January and February reaching $171.2 million and $170.5 million, respectively. March experienced a bigger hit, with sales totaling just $125.9 million – a more than 26 percent drop from the previous two months.
This drop was even more pronounced compared to the equity raising activity in the first quarter of 2015. At the same time last year, sales topped $1.14 billion, a difference of 59.1 percent.
The declining sales of non-traded products in recent months likely stemmed, at least partially, from the uncertainty of the now released fiduciary rule issued by the Department of Labor, as well as FINRA’s 15-02. The fiduciary rule proved less onerous than what was expected – and did not exclude commission based investment products, like non-traded BDCs, from retirement accounts.
Franklin Square’s FS Investment Corporation III was the top selling BDC program in the first quarter with sales totaling $132.2 million. CNL’s Corporate Capital Trust was not far behind with $111 million in sales.
Although FSIC III and CCT raised just $9.3 million and $9.5 million in March, respectively, it is important to note that in February, the two BDCs closed their offerings to investors purchasing shares through the independent broker-dealer channel.
Another Franklin Square BDC, FS Energy and Power Fund took the third spot with a sales raise of $92.7 million. Compared to the other 12 BDC’s mentioned in report, FSEP saw the only upward trending equity raise for all three months of the quarter. The company’s monthly sales totaled $18.2 million, $26.7 million, and $47.9 million in January, February and March, respectively.
First quarter equity raising activity for non-traded BDCs mirrored that of non-traded REITs, as reported by The DI Wire on Tuesday. Equity and mortgage REITs averaged a 41.7 percent decline in sales compared to last quarter, and a 59.9 percent decline year over year.
