New York, NY – The recent shift from ultra low interest rates to a more restrictive environment has significantly impacted the investment landscape. Asset classes and investment strategies that were once unattractive during the accommodating interest rate period are now gaining traction among yield-seeking investors, providing them with more options.

As interest rates rise, fixed income and bond-like assets have regained popularity due to the aggressive discount factor leading to lower valuations, subsequently pushing yields higher. Among the asset classes benefiting from this trend are private credit or Business Development Companies (BDCs). BDCs, which are publicly traded private credit investment vehicles, profit from spread capture by utilizing cheap leverage to fund private credit opportunities at higher yields.

The higher interest rates have brought several advantages to BDCs. These include higher portfolio yields based on floating rate components, juicier spreads due to cheaper external leverage, and an enhanced deal flow as traditional banks struggle with higher interest rates. As a result, the BDC space now offers investors double-digit dividend yields along with promising growth prospects.

Another asset class experiencing positive impacts from the changing economic dynamics is the midstream segment, particularly Master Limited Partnerships (MLPs). These companies generate cash flows mainly from regulated tariffs or long-term agreements, with growth opportunities arising from retained cash generation and strategic acquisitions.

Two high-yielding ETFs that have captured the favorable dynamics in the BDC and MLP sectors are the Alerian MLP ETF (AMLP) and the VanEck BDC Income ETF (BIZD). AMLP focuses on MLPs and midstream companies, offering investors a yield of around 7.7% and a concentrated exposure to pipeline transportation and processing sectors. On the other hand, BIZD tracks publicly traded BDCs in the U.S., yielding over 10.5% with a focus on the BDC sector.

Both ETFs present opportunities for investors to capitalize on the current market conditions, with AMLP offering exposure to MLPs and midstream companies, while BIZD provides a systematic approach to investing in the BDC space. With their high and growing distributions, these ETFs offer attractive options for investors seeking income in a changing economic landscape.