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Evolving Trends in Business Development Companies (BDCs) in the U.S. Direct Lending Market

Author

Listed:
  • Tomohiro Okubo

    (Bank of Japan)

  • Yutaro Kaido

    (Bank of Japan)

  • Kenta Yamamoto

    (Bank of Japan)

  • Kazuaki Washimi

    (Bank of Japan)

Abstract

In recent years, private credit has attracted growing attention as a form of financial intermediation by the NBFIs that mainly involves lending to unlisted firms. In particular, direct lending has been expanding, which provides loans to medium-sized firms and small firms, including through investment vehicles known as BDCs. BDCs are a U.S.-specific type of investment company and are considered relatively transparent due to mandatory quarterly disclosure requirements. At the same time, BDCs have a distinct liability structure compared to other direct lending funds (PD funds), as they raise capital from retail investors. This paper outlines trends and risks in the direct lending market, focusing on BDCs. Amid increasing linkages between Japanese banks and domestic institutional investors with BDCs and PD funds through investments and loans, the environment surrounding private credit markets could impact Japan's financial system. Close monitoring remains necessary.

Suggested Citation

  • Tomohiro Okubo & Yutaro Kaido & Kenta Yamamoto & Kazuaki Washimi, 2026. "Evolving Trends in Business Development Companies (BDCs) in the U.S. Direct Lending Market," Bank of Japan Review Series 26-E-1, Bank of Japan.
    • Handle: RePEc:boj:bojrev:rev26e01
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    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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