Business Development Companies (BDCs) are permanent capital vehicles that primarily finance middle-market companies with private equity sponsorship. Otherwise known as “private credit.”

The tax-advantaged structured was created by Congress in 1980. There are currently over 40 publicly-traded BDCs with a combined market capitalization of exceeding $70 billion.

Rather than owning property directly like traditional REITs, mortgage REITs (mREITs) provide debt financing secured by real estate. While mortgage REITs are typical treated as a single sub-sector, they represent a variety of business models.

Commercial-focused mREITs typically provide financing to real estate private equity sponsors. While residential mREITs run “hedge fund”-like strategies focused on mortgage-backed securities and servicing rights.

There are approximately 40 public mREITs with a combined market cap of over $60 billion.

While BDCs and mREITs are vehicles that provide exposure to underlying investments made by alternative investment managers, the companies in this category represent the managers themselves.

They are typical the General Partner (“GP”) in private funds. As private strategies continue to gain market share, Nearby Cactus believes these GPs are becoming the most important players in the global capital markets.

Including GPs in our portfolios allows clients to benefit from the fundraising and fee-earning success of these managers.