Due to their complexity and, as Statsguy points out, their opacity in dealing almost entirely with private companies, most BDC's make great targets for those in the industry who feel they can profit by pointing their finger and yelling 'FIRE!'...particularly following the credit crisis where so many financial institutions have had to revalue their financial assets to current market valuations thus costing so many investors billions in lost value.

Now, I'm not saying this guy is wrong, as I don't know enough to say he is or isn't. But I do know what ALD has distributed over the past 15 years...and despite the difficulty in analyzing operations, the giveaway is the tax character of the distributions....all ordinary income. Company management may fool regulators and investors for relatvely short periods (witness Enron), but they simply cannot sustain it, as eventually the concocted structure would simply fall apart...unless...I suppose...they had a money machine and could print the stuff.

ACAS went through this not too long ago with an article printed in the WSJ on inflated valuation of their loans and 4 or so years ago, a similar accusation was made public by the owner of thestreet.com (as I recall) that also proved to be meritless. A couple of weeks ago, another thestreet.com writer wrote this

http://www.thestreet.com/story/10418331/1/valuations-haunt-american-capital.html

But if you read through it, the author only mentions 2 of the ACAS 170 or so holdings. And because ACAS holds its loans to maturity, there really isn't a secondary market for them, as would be the case for publicly traded banks or brokerages holding CFO's or CMO's, thus I'm not sure what value there would be in marking their loans to market anyway. And shouldn't this writer disclose any short-position he may be holding?

Having said that, ACAS and ALD, with their hidden private company investments, do cause me a bit of heart burn, and I do definitely keep them in my 'high risk' group.

BruceM