One of the big themes emerging in the early stages of 2026 is rising fears about the state of private credit markets, with Blue Owl Capital (OBDC 1.79%) ranking as one of the epicenters of that angst.
This is an admittedly condensed version of what took place and what's roiling private credit investors: Blue Owl Capital is essentially a business development company (BDC), meaning it's a non-bank lender. Last month, the company announced a permanent halt to redemptions at one of its funds geared toward retail investors, pledging to compensate those stakeholders with capital from asset sales and loan payments.
For risk-tolerant investors, the BDC ETF may be worth a look. Image source: Getty Images.
That's a very simplified version of what happened, but the takeaways are much more straightforward. Investors, even some pros, are spooked about private credit at the moment. Second, risk-tolerant market participants may find value in BDCs. Enter the VanEck BDC Income ETF (BIZD 1.09%).
For the bold, BIZD may be a value play
Understanding why the BIZD ETF, the second-highest yielder in the VanEck suite, is down by more than 12% so far this year is easy. Investors are skittish about this asset class. Blue Owl Capital is the fund's second-largest holding, with a 8.4% weight, and as lost more than 38% in stock price in 2026.
But there are some gray areas to consider. Private credit default rates hit new highs last year. Still, the bulk of those disasters are confined to small issuers, while larger issuers have significantly longer odds of default.
That might not be enough comfort for income investors to flock to BDCs or the VanEck ETF, but if you're more tolerant of risk, the cost of admission is low. BDCs are trading at their steepest discounts to book value since the asset class started recovering from a slump caused by the coronavirus pandemic.
NYSEMKT: BIZD
Key Data Points
To be precise, the aggregate price-to-book ratio on BDCs recently was 0.83, well below the long-term average of 0.97. No, the BDC ETF isn't a value fund in the traditional sense, but based on those ratios, it is offering some value today.
The Fed may be helping this ETF
In an interesting twist, the Federal Reserve's reluctance to lower interest rates is working in favor of the VanEck ETF. BDCs' loan portfolios are largely held in floating-rate notes, a type of bond that benefits when rates are high. When the Fed is cutting, those lower rates weigh on the loan income generated by these lenders.
One more housekeeping item for investors considering this ETF. The expense ratio featured on the fund's website is a staggering 12.86% per year, but that's not what end users see. That whopper of a fee is the result of acquired fund fees, which regulators require to be disclosed to investors. With this ETF, the expense ratio investors are expected to be on the hook for is a more tolerable 0.42%.
