Hiroshi Watanabe The Nuveen Churchill Direct Lending Corporation ( NYSE: NCDL ) is one of the BDCs that have capitalized on the prevailing tailwinds and went public this year (late January). While NCDL's net asset base is quite large, compared to Morgan Stanley Direct Lending BDC ( MSDL ), which is another BDC that has carried out an IPO this year, the total size is roughly 2x smaller. In April, I wrote an article on MSDL, assessing the underlying fundamentals to understand whether they are attractive enough to go long and compensate for the lack of track-record as a public company.
The conclusion was positive and since then, MSDL has clearly outperformed the BDC index. However, if we look at the chart below and compare NCDL's total return performance to that of MSDL and the BDC index, we will notice that there is a quite meaningful gap or negative alpha that is associated with NCDL. YCharts With this context in mind, let's dig a bit deeper into NCDL's fundamentals to understand whether the combination of recent underperformance and financials justify going long here.
Thesis The focus of NCDL is mostly on investing in senior secured loans to private equity backed U.S. middle market companies.
This goes in line with the investment strategy of the majority of BDCs out there. As we can see in the table below, the total portfolio value of NCDL is around $1.8 billion, where the investments are spread across 195 different companies, thereby introducing a decent element of diversifi.
