PBDC vs. BIZD: Which BDC ETF Outperforms for Retirement Income?

As retirees seek steady income streams without excessive risk, Business Development Company (BDC) ETFs like the Putnam BDC Income ETF (PBDC) and VanEck Vectors BDC Income ETF (BIZD) offer compelling options. Both target high-yielding BDCs, but their approaches to dividend stability, risk management, and sector exposure diverge sharply. Below, we dissect their strengths and weaknesses to help retirees decide between capital preservation and income growth.

Dividend Stability: BIZD Leads, But at a Cost

BIZD edges out PBDC in dividend yield, offering 11.11% (as of June 2025) versus PBDC's 9.66%. This makes BIZD a favorite for investors prioritizing income. However, higher yields often come with higher risk. BIZD's maximum drawdown since inception (-55.47%) underscores its volatility, while PBDC's lower risk profile (-20.28% max drawdown) suggests better capital preservation during market stress.

The trade-off is clear: retirees who can tolerate swings might favor BIZD's income, but those seeking steady returns should lean toward PBDC.

Risk Metrics: PBDC's Calm Amid Chaos

PBDC's risk-adjusted performance ratios dominate BIZD's in nearly every category. For instance:
- Sharpe Ratio: 0.37 (PBDC) vs. 0.31 (BIZD)
- Sortino Ratio: 0.59 (PBDC) vs. 0.48 (BIZD)
- Ulcer Index: 5.79% (PBDC) vs. 5.69% (BIZD)

While BIZD's Ulcer Index edges out PBDC by 0.1%, the active management of PBDC consistently reduces downside risk without sacrificing returns. During the Fed's recent rate hikes (2022–2025), PBDC's volatility (3.84%) matched BIZD's but with less peak-to-trough damage.

Sector Exposure: A Hidden Differentiator?

Both ETFs focus on BDCs, which lend to small-to-midsize businesses. However, BIZD's passive design ties it to the MVIS US Business Development Companies Index, while PBDC's active management allows dynamic sector tilts.

While sector allocations aren't fully disclosed, BIZD's long-term returns (16.86% annualized over five years) suggest it leans into established BDCs with broad exposure. PBDC, launched in 2022, may favor lower-volatility subsectors or debt structures (e.g., senior secured loans), as seen in Golub Capital BDC's portfolio (see below).

Expense Ratios: PBDC's Stealth Advantage

PBDC's expense ratio (6.79%) is 40% cheaper than BIZD's (10.92%). Over time, this gap compounds:
- A $100,000 investment in PBDC retains $4,130 more over 10 years compared to BIZD.

Low expenses are critical for retirees, as they maximize returns in a low-growth environment.

Performance During Rate Hikes: PBDC's Resilience Shines

The Fed's aggressive rate hikes (2022–2025) tested BDCs, which rely on floating-rate loans. PBDC's 1-year return (+7.07%) outpaced BIZD's (+5.60%), and its shorter history avoids BIZD's brutal drawdowns during the 2020 crisis.

BIZD's longer track record (launched in 2013) includes periods of outperformance, but its volatility makes it riskier in sustained high-rate environments.

The Bottom Line: Choose Your Priority

• For Capital Preservation: PBDC wins hands-down. Its lower risk, active management, and expense advantage make it safer for retirees fearing market drops.
• For Income Growth: BIZD's higher yield is tempting, but only if you can stomach larger swings. Its historical drawdowns are a red flag for conservative investors.

Final Recommendation

• Retirees prioritizing capital safety: Allocate 70–80% of a fixed-income portfolio to PBDC. Pair it with Treasury bonds for stability.
• Retirees seeking income growth: Use BIZD for 20–30% of your portfolio, but offset its risk with dividend-paying blue chips or REITs.

Both ETFs have roles, but PBDC's blend of yield, low risk, and cost efficiency makes it the safer choice for most retirees.

Data as of June 6, 2025. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.