E-Tracs Wells Fargo Business Development Company Index ETN (BDCS)
Technically, this exchange-traded note is not a fund. You pay 0.85% for the privilege of getting diversified exposure to the exact performance of the above-mentioned index. Business Development Companies, or “BDCs,” are publicly traded corporations that engage in lending at high yield rates to smaller fish. The larger entities often take equity ownership in the smaller venture, offering business acumen in addition to capital. They are similar to private equity firms, though the Securities and Exchange Commission (SEC) requires BDCs to invest 70% of assets in U.S. companies as well as to distribute at least 90% of taxable income in the form of dividends. (And that’s how BDC shareholders often get juicy 7%-9% yields!)
At the moment, BDCS offers about 7% annualized. Of course, investors seem to be benefiting from impressive capital appreciation as well, with the ETN hitting an all-time high.