Shares of publicly traded private credit funds, which make direct loans to businesses, are down a third from last year's height.

The funds, known as business development companies, or BDCs, lend to businesses owned by private equity. They use the interest they get to pay fat dividends to investors.

Brokers pitched them as near equivalents to their clubby counterparts, the nontraded private credit funds sold to rich folks by managers like Ares Management, Blue Owl Capital, and KKR. At their height last year, President Donald Trump ordered federal agencies to clear the way for retirement plans to add private credit funds to 401(k) menus.

Those were the days.

Since early 2025, the VanEck BDC Income ETF is down 33%. Any "resistance" levels seen by technical analysts in the benchmark's chart haven't held up.

Looking past the ETF to the funds it holds, the BDC crowd has dispersed. Industry leader Ares Capital Corp. fund is down 9% this year. The FS KKR Capital fund is down 27%. The Blue Owl Capital Corp. fund has sunk 38%.

Raymond James analyst Robert Dodd notes that the public BDCs now trade at an average of 82% of their net assets, which are the book values they have marked for their portfolios of loans. Some of the discount reflects investors' distrust of those privately computed values for the loans.

That leaves some funds with screaming yields. The Ares fund yields 10%. Blue Owl Capital yields 12%, and the FS KKR fund yields 19%.

Surely those yields make them compelling values, you might think. But only if enough others eventually agree with you.

The KKR fund cut its payouts this year and investors remain worried that artificial intelligence will hurt the software companies these funds have lent to. Investors see BDCs as melting snow caps in a warming world.

There's much more money invested in nontraded BDCs, but that part of the business also saw investors pulling out and overwhelming the 5%-per-quarter limits those funds put on redemptions.

Those exiting were mostly individuals, not institutional investors. But many funds suffered net outflows and the unfulfilled redemption requests made the headlines.

New redemption requests at nontraded BDCs seem to have slowed in the September quarter, according to Moody's analyst David Tao and his colleagues. While exit requests were only slightly lower than in the June quarter, most of September's requests were carry-overs from past quarter requests that hadn't gotten through the 5% gates, says Moody's.

If that's an early sign that private credit anxieties are moderating, then maybe the prices of public BDCs will stop falling so fast.

And if you are tempted by their juicy yields, keep an eye on their dividend coverage.

The Ares Capital fund is the favorite among public BDCs. Yet in his Lead-Lag Report last week, analyst Michael Gayed noted that the fund's regular 48 cents-a-share quarterly dividends haven't been quite covered by its core earnings this year.