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Jun 17 2015

IPA Provides a Performance Guideline for Non-Traded BDCs

Non-traded business development companies (BDCs) may soon publish performance figures in a standardized way. The Investment Program Association (IPA) recently announced that its Board of Directors has approved a guideline for sponsors of non-traded BDCs as it relates to performance statistics and shareholder returns.

Commenting on the new guidelines, Kevin Hogan, CEO and president of the IPA said, “Based on the overwhelming adoption by our members of similar IPA Guidelines, the Board expects that BDC investment sponsors will adopt this Performance Guideline in their future reporting.”

Developed by the IPA’s BDC Committee with input from the trade group’s Legal & Regulatory, Compliance, and Due Diligence Committees, plus contributions from the Financial Industry Regulatory Authority (FINRA), the seven-page Non-Listed BDC Performance Guideline offers sponsors of non-traded BDCs recommendations in the below performance areas:

  • Basis of performance figures
  • Reporting of performance figures
  • Shareholder returns (without sales charge) definition, example of methodology and recommended disclosure
  • Shareholder returns (with sales charge) definition, example of methodology and recommended disclosure
  • Net Asset Value (“NAV”) returns definition, example methodology and recommended disclosure


In 2010 the IPA developed and implemented the MFFO (modified funds from operations) Performance Measure which offers a method of reviewing and comparing non-traded REIT performance.

The Non-listed REIT Valuation Guideline, established in 2013, provides a standardized method of valuing non-traded REITs in an institutional and transparent manner designed to accelerate the delivery of investment values to investors.

“Over nearly five years, the IPA has endeavored to standardize several of the key performance metrics in the direct investments industry, which we think is the right path toward continued growth,” said Hogan.

Tom Sittema, CEO of CNL Financial Group, and chairman elect of the IPA commented, “It is important that our industry continues to enhance the clarity of product performance across asset classes.”

He added, “Non-listed BDCs are increasingly an important income vehicle for a range of investors.”

And the investment vehicle is certainly growing in popularity.

The first non-traded BDC launched in 2009 by the Philadelphia-based Franklin Square Capital Partners. Today, there are over 14 non-traded BDC programs available from 11 sponsors with additional sponsors expected to enter the market with new offerings this year.

As the industry grows, advisors and investors will need better tools and resources to compare investment options.

“To standardize the way that investment sponsors report product performance provides advisors a powerful communication tool, as they work with their clients to plan their future,” suggests Sittema.

To view the IPA’s Non-Listed BDC Performance Guideline, click here.

Article by: The DI Wire


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