A large-sample analysis shows SBIC funds outperform non-SBIC peers across IRR, MOIC, and PME. Performance is strongest for funds using moderate SBA leverage and larger fund sizes, with equity strategies showing greater variability than debt funds.
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Abstract
We survey Small Business Investment Companies (SBICs) to perform a novel analysis of their performance. SBIC funds outperform comparable non-SBIC peers by around 2% to 3% as measured by internal rate of return and about 0.3x to 0.7x as measured by multiple on invested capital, depending on benchmark deployed. To mitigate sample selection bias, we also examine SBICs in the MSCI Private Capital Universe data, which shows similar, but smaller, outperformance. We analyze SBIC funds by fund strategy and amount of leverage utilized to provide a granular view of risk-adjusted performance. We believe this to be the first large-sample analysis of SBIC returns.