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# Why Ares Capital Is Likely To Underperform The BDC Sector (Archive)
- URL: https://www.huntingalphas.com/why-ares-capital-is-likely-to-underperform-the-bdc-sector-archive/
- Published: 2023-12-27T04:38:00.000Z
- Updated: 2026-02-27T05:37:27.000Z
- Description: Defensive positioning and floating-rate exposure make Ares Capital poorly placed for easing rates tailwinds.
- Author: Vish (Hunting Alphas)
- Tags: 5-Minute Pitches, #noindex, Archive, #sa-origin, ARCC, Financials

*This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.*

## Elevator Pitch

- I missed 1.48% of alpha creation in my last article on Ares Capital when I had downgraded it to a hold. Yet, I still downgrade ARCC to a 'Strong Sell':
- The chances of a rate reduction by the Federal Reserve are increasing, which could benefit the BDC sector, particularly BDCs with greater cyclical exposure.
- Ares Capital is not well-positioned to benefit from easing rates due to its defensive orientation and predominantly floating investment yields.
- The relative performance outlook of ARCC vs the BDC sector via the VanEck BDC Income ETF confirms the fundamental view.
- Overall, I have a strong relative bearish view on ARCC vs BIZD primarily and also the S&P 500\. This is not a strong bearish view of the absolute return prospects of ARCC.

Read the full article [here](https://seekingalpha.com/article/4659828-ares-capital-likely-underperform-bdc-sector?ref=huntingalphas.com).

#### Disclosures and Disclaimers

**Past performance ≠ future results. Not investment advice. See* [**full Disclaimer*](https://www.huntingalphas.com/disclaimer/)**.*