Hilton BDC Corporate Bond ETF (HBDC)

The Hilton BDC Corporate Bond ETF is a specialized fixed-income investment vehicle that targets business development company (BDC) corporate bonds through index tracking methodology. This newly established fund operates under the Tidal Trust II umbrella structure and seeks to provide investors with exposure to a specific segment of the corporate bond market through passive management strategies.

Fund Structure and Legal Framework

Basic Fund Information

The Hilton BDC Corporate Bond ETF will trade starting on Wednesday June 11, 2025 under the ticker symbol HBDC on the Nasdaq Stock Market2. The fund operates as part of Tidal Trust II, with Tidal Investments, LLC serving as the investment adviser2. This structure represents a collaboration between Hilton Capital Management’s expertise in fixed-income analysis and Tidal’s ETF operational capabilities. The fund’s legal entity identifier (LEI) is 254900DTSOISMFOUM402, providing regulatory transparency and compliance with international financial reporting standards4. The fund’s headquarters are located at 234 West Florida Street, Suite 203, Milwaukee, Wisconsin, while its legal address is registered through The Corporation Trust Company in Wilmington, Delaware4. This dual-location structure reflects the operational management in Milwaukee while maintaining Delaware incorporation, a common practice for investment fund structures. The fund achieved active status following its entity creation on March 19, 2025, with initial LEI registration occurring on April 17, 20254.

Investment Objective and Strategy

The primary investment objective of the Hilton BDC Corporate Bond ETF is to track the performance, before fees and expenses, of the Solactive Hilton Capital BDC Corporate Bond TR Index2. This passive management approach seeks to replicate the index’s performance through strategic bond selection and portfolio construction methodologies.

Investments

Using a “rules-driven structure”, the index will invest in all BDC unsecured notes issuances greater than $250 mn. From what we understand, there are just over 100 different issues involved, typically of the larger public and non-traded BDCs. The ETF has a 10 % issuer cap to avoid too much concentration and will be re-balanced quarterly. The ETF is only investing in “fixed coupon bonds; excludes floaters, converts, perpetuals and $25 par issues”.

Fee Structure and Cost Analysis

Expense Breakdown

The fund is charging a fee of 0.39%2. This expense ratio consists entirely of management fees, as the fund charges no distribution or service (12b-1) fees and reports zero other expenses2. According to Perplexity “The 0.39% management fee positions the ETF competitively within the specialized corporate bond ETF space while providing cost-effective access to BDC corporate bond exposure”.

The fund’s adviser, Tidal Investments, LLC, assumes responsibility for most operational expenses beyond advisory and sub-advisory fees, interest charges on borrowings, dividends and expenses on securities sold short, taxes, brokerage commissions, and other transaction-related costs2. 

VIEWS

History Lesson

Over a decade ago, as the BDC sector grew in size and reputation, the managers ceased relying almost exclusively on secured borrowings such as Revolvers or on-balance sheet securitizations.

BDC CFO’s turned to the “$25 par issues” – i.e. Baby Bonds; preferred stock and fixed income issuances placed with institutional investors.

Chosen

It’s that last segment that Hilton Capital Management is addressing with this new ETF.

The debt typically is investment grade rated (98% is said to be rated BBB , with only a Prospect Capital bond or two rated lower at BB).

Most issues have a 5 year maturity with no pre-payment option.

Different

There appears to be no overlap with the 31 public BDCs in the BDC Fixed Income Table both due to the larger size of the debt offerings in HBDC and because they are “$25 par issues” – i.e. Baby Bonds.

Expect the average yield to maturity to be lower than the Baby Bonds – which currently yield north of 7% per annum, with some individual issues promising total returns above 8%.

Safety First

This ETF – thanks both to its highly diversified construction and the nature of both the investments and the BDCs involved – will offer investors as safe an investment in the BDC debt space as is available right now, as well as the benefit of liquidity.

In our view the ETF offers a very intriguing option for BDC investors seeking short or long term shelter from the vagaries of BDC common stock prices and – arguably – even better credit quality than the Baby Bond market.