New Research: Price Discovery in Private Credit: Evidence from BDCs

Private credit has grown into a multi-trillion-dollar market — but with loans that rarely trade and values reported only once a quarter, how much do investors actually know about what they hold?

In a new white paper from Reena Aggarwal, Robert E. McDonough Professor of Finance and Director of Psaros Center for Financial Markets and Policy, along with co-authors Isil Erel, David A. Rismiller Chair in Finance at the Fisher College of Business of the Ohio State University and Changyong Song, Postdoctoral Researcher at Psaros Center for Financial Markets and Policy, the study explores how quickly and accurately markets price private credit risk through BDCs — public vehicles that combine continuously traded stock with quarterly reported net asset values.

What this paper covers:

• How BDC stock prices and reported NAVs each respond when credit markets come under stress
• Whether market discounts and stock returns can predict future NAV markdowns, profitability, and dividend cuts before they’re officially reported
• Why public prices are better at anticipating broad shifts in portfolio value than discrete events like non-accruals or PIK amendments
• What quarterly NAV announcements still add, even after the market has already moved

As private credit opens up to a wider range of investors, understanding how — and how well — its risks get priced is critical for regulators, lenders, and anyone allocating capital to the space. Read the full white paper to see what public markets can, and can’t, tell us about the value of private, hard-to-observe credit.