Key Takeaway: ARCC, GBDC and OBDC

Key Takeaway: Despite the Fed cutting rates by 175 basis points, BDCs maintain ROEs above 8%, though many trade at 78% of book value, pricing in recession-level losses. Mitchel Penn highlights ARCC, GBDC, and OBDC as top picks due to attractive valuations and strong historical performance. While software exposure — pegged at 40% for TSLX — raises AI-related credit concerns, Penn notes that the industry remains well-capitalized with leverage safely below 1.3x. Investors should prioritize five-year average ROE as the primary predictor of future price-to-book value.