HCM Insights
Index Evolution: Methodology Refinements & New Issuer Strengthen HBDC Benchmark
The Solactive Hilton Capital BDC Corporate Bond TR Index1 (the “Index”) completed its December 1, 2025, rebalance with two meaningful developments: methodology refinements and the addition of a new issuer: Capital Southwest Corporation.
The methodology refinements strengthen how the Index identifies eligible Business Development Corporations (BDCs) and manages issuer concentration, while the inclusion of Capital Southwest Corporation broadens the set of credit platforms represented.
Together, these updates enhance the Index’s ability to serve as a consistent, representative benchmark for the investable BDC senior note market.
Index Enhancements: A More Durable & Consistent Framework
Index provider Solactive AG (Solactive) recently approved and implemented several refinements to its Index methodology, effective with the December rebalance. The changes are aimed at improving both issuer eligibility and weighting structure, reinforcing the Index’s reliability as the BDC senior note market continues to develop.
Anchored Issuer Selection
The updated methodology now anchors eligibility to the SEC’s annual Business Development Company Report. This provides a standardized, regulator-sourced foundation for determining which entities are formally recognized as BDCs.
Additionally, to prevent omissions caused by reporting lags, the rules incorporate a defined secondary check: Issuers not appearing in the SEC report remain eligible when EDGAR filings show an active Investment Company Act 814-xxxxx file number or a filed Form N-54A without a corresponding withdrawal.
This approach reduces ambiguity and creates a more complete, verifiable issuer universe.
Defined Treatment of Succession Events
The refinements also formalize how the Index handles corporate transitions. When one BDC is succeeded by another, eligibility passes to the successor when EDGAR documentation reflects the assumption of obligations. This ensures continuity and minimizes disruptions caused by organizational changes.
Issuer Caps Designed to Manage Concentration
The Index has also transitioned from a single 10% cap to a tiered system that promotes diversification while maintaining the relevance of larger platforms.
The structure limits the aggregate weight of all issuers above 5% to no more than 50% of the Index, supporting the needs of products that must consider RIC “5/10/50” diversification framework.
New Tiered limits:
- Top two issuers: 10% each
- Next two: 8% each
- Following two: 7% each
- All remaining: 4.99% or less
Whenever an issuer’s natural weight exceeds its cap, the surplus is redistributed to issuers with remaining headroom until the Index totals 100%. The result is a predictable, disciplined weighting process.
New Issuer Added: Capital Southwest Corporation
The December rebalance also introduced Capital Southwest Corporation, an internally managed BDC providing financing solutions to lower-middle-market and middle-market companies, primarily through senior secured lending and selective equity co-investments.
The Index gains exposure through Capital Southwest's senior notes, which are supported by a diversified portfolio of private company loans and a longstanding underwriting platform.
The company’s inclusion broadens the Index’s coverage and adds another established BDC credit platform, contributing to greater diversification across issuers.
Broader Implications
The methodology refinements discussed here signal the continued maturation of the market infrastructure surrounding BDC senior notes within private credit.
By establishing clearer, more comprehensive selection criteria and transparent concentration management, the Index reinforces its role as a systematic way to access this income segment.
For investors, these changes underscore two themes:
- The growing sophistication of the tools available to participate in BDC-issued debt, and
- The importance of transparent, rules-based frameworks in managing exposure across a diverse set of credit platforms
Together with the addition of Capital Southwest, these developments strengthen the Index's ability to serve as a comprehensive benchmark for income strategies tied to middle-market lending via BDC senior notes.
1The Solactive Hilton Capital BDC Corporate Bond Index is a rules-based index that seeks to track the total performance of bonds issued by Business Development Companies. Investing in Business Development Companies (BDCs) involves various risks, including interest rate risk, credit risk, and liquidity risk, which can significantly impact returns. Please note, an investment in the fund is not a direct investment in a BDC or in one of the issuers identified above.
As a passive fund, the Fund seeks to replicate the performance of its index. However, differences may arise due to fund expenses, trading activity, or index changes. The Fund may also hold securities not in the index or may not always be fully invested in index components. All index information is as of 12/1/25, is sourced from Bloomberg, and may change at any time.
For general informational purposes only. Not personalized investment advice or a recommendation or solicitation to buy or sell any security.
About the Hilton BDC Corporate Bond Index
The Hilton BDC Corporate Bond Index (the “Index”) was created by Hilton Capital Management, LLC, and is owned, calculated, and administered by Solactive AG. It offers focused exposure to fixed-income securities issued by U.S.-registered Business Development Companies (BDCs), seeking to give investors access to higher yields within a regulated, investment-grade structure.
Complete Fund Holdings Found Here: Hilton BDC Corporate Bond ETF
About the Hilton BDC Corporate Bond ETF
The Hilton BDC Corporate Bond ETF (the “Fund”) is an exchange-traded fund (“ETF”) that uses a “passive management” (or indexing) approach to track the performance, before fees and expenses, of the Index.
Important Disclosures:
Before investing you should carefully consider the Fund’s investment objective, risk, charges and expenses. This and other information is in the prospectus. A prospectus or summary prospectus may be obtained by visiting www.hiltonetfs.com or calling 1-833-594-4586. Please read the prospectus carefully before you invest.
Investing involves Risk, including possible loss of principal. The Fund is a recently organized management investment company with no operating history. As a result, prospective investors do not have a track record or history on which to base their investment decisions. There is no guarantee that the Fund’s investment strategy will be successful.
Investors buy and sell ETF shares through a brokerage account or an investment advisor. Like ordinary stocks, brokerage commissions, and/or transaction costs or service fees may apply. Please consult your broker or financial advisor for their fee schedule.
Credit Risk: Debt securities held by the Fund are subject to the risk that an issuer or related party (such as a guarantor or counterparty) may fail to meet its financial obligations. These failures can negatively impact the value of the investment and the Fund’s ability to receive expected income or principal repayments. Fixed Income & Interest Rate Risk: Fixed income respond to economic developments particularly interest rate changes, as well as to changes in an issuer’s credit rating. Fixed Income investments typically decline in value when interest rates rise and increase in value when rates fall. Longer-duration and lower-rated securities are generally more sensitive to these changes. Interest rate movements, including those driven by central bank policy, may also impact the Fund’s income. Index and Tracking Error Risk: As a passive fund, the Fund seeks to replicate the performance of its index. However, differences may arise due to fund expenses, trading activity, or index changes. The Fund may also hold securities not in the index or may not always be fully invested in index components.
Distributor: Foreside Fund Services, LLC ("Foreside"). Hilton Capital Management and Foreside are not affiliated.
