Hilton BDC Corporation Bond ETF (HBDC)

Overview

HBDC is pioneering the market as the first exchange-traded fund (ETF) dedicated exclusively to investing in debt issued by US-registered business development companies (BDCs). These BDCs serve as specialized investment vehicles with the primary goal of channeling capital towards small and medium-sized businesses within the United States, fostering growth within the private sector. In this regard, debt securities associated with BDCs are known to offer returns that often exceed those of Baa-rated corporate bonds, making them an appealing choice for income-seeking investors. Generally, these investments maintain an investment-grade credit rating, further enhancing their attractiveness.

The BDCs have established a solid reputation for their prompt repayment capabilities, highlighting their reliability as investment vehicles. The underlying index that HBDC tracks specifically concentrates on fixed-coupon bonds that are issued by BDCs, as detailed in the annual Business Development Company Report released by the SEC. Bonds that qualify for inclusion in the index must adhere to specific liquidity and size criteria, ensuring that only robust securities are represented.

The portfolio of HBDC is structured with an emphasis on market value; securities are weighted accordingly to reflect this. To mitigate risks associated with over-concentration in single issuers, the index implements a strategic guideline, capping exposure at 10% per issuer and undertaking rebalancing activities on a quarterly basis.

Products and Services

• Exchange-Traded Fund (ETF):

  HBDC operates as a dedicated ETF, focusing on the unique space of BDC-issued debt, which grants investors access to a distinctive asset class uncommonly found in standard investment products. This allows for greater portfolio diversification while aiming for higher returns.

• Investing in Debt Securities:

  The ETF primarily invests in fixed-coupon bonds from BDCs, which historically provide attractive income opportunities and are generally backed by reliable repayment records. The investment strategy is aimed at balancing yield while maintaining investment-grade ratings.

• Quarterly Rebalancing:

  To maintain a diversified portfolio and limit exposure, HBDC conducts quarterly rebalancing. This process ensures that no single issuer exceeds a 10% cap, which helps in managing risk effectively while adapting to market conditions.

• Comprehensive Index Tracking:

  HBDC follows an underlying index that exclusively focuses on eligible bonds as outlined in the SEC’s Business Development Company Report. This thorough approach supports transparent investments, rooted in defined liquidity and size standards.

• Market Value Weighting:

  With securities weighted by market value, HBDC emphasizes the importance of larger, more stable bonds within its investment strategy. This approach bolsters the potential for higher returns while reducing volatility.