Want $10,000 a Year on $100K? The Private-Credit Funds Banks Can’t Compete With Pay 10%+

For those seeking $10,000 annually from a $100,000 investment, private credit funds offered by banks may be a more competitive option compared to the BIZD ETF. BIZD's expense ratio of 0.89% increases to double digits after accounting for the Acquired Fund Fees and Expenses (AFFE). In contrast, ARCC delivers a 231% return over 10 years, while PBDC provides a comparable BDC exposure at a lower expense ratio of 0.13%.

CSWC, with a 99% first-lien book, offers a forward yield of 9.26%. BDC dividends are taxed as ordinary income, making an IRA the preferred account for rotating out of BIZD into direct holdings. BIZD's dividend has decreased from $1.8190 in 2024 to $1.5236 over the past year, with a payout ratio of 142.70%, indicating more distribution than earnings.

The top three alternatives are ARCC, MAIN, and CSWC. ARCC's 9.51% yield and 230.92% 10-year return outperform BIZD's 5.22% yield and 111.88% return. MAIN's 5.22% yield, 18.9% ROE, and 20 consecutive supplemental dividends make it an attractive option. CSWC's 9.26% yield, backed by 99% first-lien senior secured debt, yields a 9.26% forward payout.

A blended approach of these funds can provide an 8% to 10% distribution yield while avoiding the AFFE leakage, reaching the $10,000 income target on $100,000 without incurring wrapper fees.