If it's small, they can pick better loans, they don't need to spread out thin and possibly write bad loans.
Perhaps, but think of investment banks. The big guys get all the quality deals - Facebook, Google, Twitter. The little guys are the ones usually bringing the dodgy crap to market - Snacks.com!. It's great to say a small BDC can choose only the best loans, but I'll bet a small BDC sees less opportunities than the largest major players - the big guys probably see EVERYTHING, and can pick the best.
And they can pay more in salary to their employees, so if you believe that quality employees follow high pay, that's going to help a tier one BDC over a tier 2 BDC.
It's all theoretical, but I think it makes sense. I think PSEC is now about about $2.5b-$3.0B in assets, and I guess they just plan to milk that capital for the time being. They have said that some customers want a $100 million + loan, and there is a very small group of BDCs that can offer that $ amount. |
