LBC Capital Income Fund, LLC vs. Publicly Traded BDCs: What Investors Should Know

When it comes to private credit, many investors turn to Business Development Companies—BDCs—for exposure to the asset class without locking up capital. BDCs are traded publicly, they offer enticing yields, and they’re accessible to everyday investors. But beneath the surface, public markets introduce layers of complexity and risk that can easily derail long-term income strategies.

By contrast, private debt funds like LBC Capital Income Fund, LLC offer the same asset-backed returns—often 8–10%—without the noise of daily ticker swings or aggressive leverage. If steady income, capital preservation, and transparency lead your investing, a private fund may be a clearer path than chasing yield through a BDC.

Let’s explore why—and when—private credit outshines its public counterpart.

1. Liquidity vs. Volatility: The Trade-Off

BDCs: Easy Entry, Unwanted Choppiness

Publicly traded BDCs can be bought and sold on any business day. Sounds good—until headlines or broader market moves send the stock plunging. Even if the underlying loans are performing, BDCs trade at discounts or premiums to NAV. Valuations can swing wildly, and investors caught by these moves face anxiety and questions about whether to sell low or stay put.

LBC Capital Income Fund, LLC: Calm, Quiet, and Predictable

LBC Capital Income Fund, LLC operates as a private vehicle, not a traded security. That means:

• No daily price swings. NAV is updated monthly based on asset performance—not market chatter.
• Income matters most. We distribute sensible income month after month.
• Liquidity windows. While we offer periodic redemption opportunities, these are structured to support the portfolio—not disrupt it.

If you want cash flow without emotional whiplash, private funds hit the mark.

2. Leverage and Risk: Hidden Dangers in BDCs

BDCs Often Use High Leverage

Data from the BDC industry shows that many funds carry debt-to-equity ratios of 0.5–1.0x or higher. Leverage amplifies income in good times—but in volatility, it also magnifies losses. During the 2022–2024 downturn, BDC indices fell sharply—dividend cuts arrived, and many trades plunged 20–30%, even though most underlying loans remained solvent.

LBC Capital Income Fund, LLC Takes a Conservative Stance

Our fund uses no fund-level leverage. Each loan stands on its own merit, featuring:

• Conservative loan-to-value ratios.
• White-glove underwriting.
• Floating-rate interest tied to benchmarks like SOFR.

By avoiding systemic leverage, we avoid systemic risk—and create space for steady, sustainable returns.

3. Fee Transparency: Who Wins, Who Loses

BDC Fee Layers

Public BDCs can have multiple fee layers:

• Management and incentive fees.
• Performance-based fees—even when your yield is under pressure.
• Internal costs baked into NAV calculations.
• Hidden expenses like acquisition fees or servicing charges.

These add up, and in volatile periods, they erode returns, especially when valuations slip.

How LBC Capital Income Fund, LLC Keeps Fees Clean

We believe transparency builds trust:

• Simple, flat management and servicing fee structures.
• No incentive fee until investors receive their full 8% preferred return.
• Zero hidden or back-end charges—what you see is what you earn.
• Clear financial statements delivered monthly, with loan-level detail.

Our approach removes unwrap-and-discount headaches—fees don’t surprise you, and returns are easier to measure.

4. Strategy Discipline: Income or Income + Flips?

BDCs Feel Earnings Pressure

As publicly traded vehicles, BDCs face pressure to hit earnings targets each quarter. That can force risky lending decisions—stretching credit, chasing higher-yield deals, or loosening covenants—decisions driven more by investor expectations than credit quality.

LBC Capital Income Fund, LLC: Asset-Centric Discipline

Our loan selection centers on:

• Real estate deals with clear exit plans.
• Conservative risk ladders—no speculative upside gambles.
• Aligned cash flow distribution—we distribute before we earn, not the other way around.

The difference? We stay silent on margin pressure—and loud on credit criteria.

5. NAV vs. Price Discovery: What Really Reflects Loan Health?

BDC NAV Is Marked to Market

Publicly traded BDC NAVs fluctuate daily alongside share prices—even when underlying loans are unchanged. For investors, this can spark emotional reactions: “Buy the dip?” or “Sell the rally?” Those decisions often feel more tactical than strategic.

LBC Capital Income Fund, LLC’s NAV is Loan-Based

NAV moves are based on real loan interest, defaults, fees, and expenses—not market chatter. That clarity enables investors to track actual fund performance on financials—not on fear or greed.

6. Tax Efficiency: When Ownership Structure Matters

BDCs and Tax Complexity

BDCs pass through distributions, but share price moves can lead to unexpected capital gains or losses for retail investors. Plus, multi-layered structures can complicate tax accounting.

LBC Capital Income Fund, LLC’s Simpler Flow

Investors receive categorized distributions—interest, return of capital, or earnings. We issue clean reports, minimizing tax surprises. Trade-offs? You trade daily liquidity for tax predictability.

7. Alignment and Governance: Who’s at the Helm?

BDCs Answer to Shareholders

Public companies are subject to quarterly earnings pressures, activist investors, and board shifts. Risk-taking and strategy often bend toward short-term return goals.

LBC Capital Income Fund, LLC: Aligned Leadership

Our team invests its own capital alongside yours. Our compensation structure rewards long-term partnership, not rapid turnover or aggressive yield chasing.

8. Which One Suits Your Strategy Best?

Public BDCs Might Fit If You:

• Want daily liquidity and public price discovery.
• Can tolerate market volatility.
• Prioritize market-based tech exposure or active credit strategies.

LBC Capital Income Fund, LLC Private Fund May Suit You If:

• You value steady income and long-term preservation.
• You aren’t trading for short-term gain or opportunities.
• You want aligned incentives.
• You need clarity in reporting and fee structure.

It Comes Down to Goals

Public BDCs and private debt funds both offer access to credit returns. But not all returns tell the same story. With LBC Capital Income Fund, LLC, you get strategy-driven income, clear underwriting, and an aligned team—a model built for investor stability, not market noise.

In an investment landscape full of volatility, sometimes the best yield is peace of mind.

Ready to explore how private debt fits into your portfolio? Reach out to dive into our income track record, portfolio structure, and performance data.