This little-known asset class allows you to invest in some of the world’s fastest-growing companies… before they go public.

It’s all over the headlines. You can’t turn on CNBC or open an issue of The Wall Street Journal without hearing about it.

I’m talking about Facebook (Nasdaq: FB). Yes, Facebook.

Over the last couple of months, Facebook has been trashed. The stock is down almost 50% since it first started trading in May.

If you’re a regular Dividend Opportunities reader, Facebook’s woes shouldn’t be a surprise. We warned you about the company’s impending troubles before the stock even went public.

So why bring it up then?

I’m telling you this because despite Facebook’s problems as of late, there are still tons of people that have made money off this stock. They’re cashing in their shares and making millions of dollars… even from what’s being called “the worst IPO of the last 10 years.”

For example, just this past week Peter Thiel — one of Facebook’s first investors — sold 20 million of his shares of the company for a $400 million profit… and that was after he had already made another $640 million selling shares in the initial public offering.

And then there’s the story of David Choe… an artist who painted murals on the walls of Facebook’s office. Rather than take his fees in cash, Choe took it in Facebook stock. Choe’s stake was recently valued at close to $200 million.

For these early investors, Facebook has been a goldmine. These guys are literally millionaires because of the stock.

The big difference? They acquired shares of Facebook BEFORE the company went public…

Thiel gave the company $500,000 in 2004, back when it was still known as “The Facebook.” And Choe? He got his shares in 2005, long before the world was obsessed with newsfeeds or relationship statuses.

Back then, shares of Facebook weren’t listed on any exchange. As you can imagine, for people like you and me to buy a stake would have been almost impossible. Normally, these kinds of investment opportunities are reserved for “elite” investors and company insiders.

But the good news is my colleague, Andy Obermueller, has found a way for investors like you and me to get in on the action. Simply put, he’s found a unique set of securities that let investors like us buy into some of the world’s fastest-growing companies (including Facebook beforeit went public) while they’re still in their most lucrative growth stages.

The secret?

It’s a little-known asset class called business development companies, or BDCs.

Business development companies loan money to small private businesses in order to fund their growth. In exchange for the loans, BDCs normally receive interest payments, or an equity stake in the company they’re loaning to.

In other words, when you buy shares of a BDC, you’re investing in a portfolio of the world’s fastest-growing businesses… while they’re still private.

For example, Facebook just went public about three months ago. But Hercules Technology Growth Capital (NYSE: HTGC), a publicly traded BDC, bought over 300,000 shares of the company when it was still private — giving investors a stake in the shares long before its IPO.

To be fair, given the recent drop HTGC is down on its original Facebook investment. But there is no denying the power of investing in BDCs. In a world where small private companies — only available to some of the richest and well-connected investors — are at a big advantage, business development companies help level the playing field.

And while you won’t become a millionaire overnight, the best part is BDCs are required by law to distribute 90% of their earnings to shareholders. That means if a company in its portfolio is acquired or goes public, the BDC has no choice but to distribute the profits to its shareholders.

That means BDCs usually carry rich dividend yields. For example, right now HTGC is yielding 8.5%. And MGC Capital (Nasdaq: MCGC) yields more than 12%.

Of course with investing, nothing is 100% risk-free. And the same goes for investing in business development companies. But what might surprise you is that investing in a basket of small, private companies isn’t nearly as risky as it may seem.

For one, due to government requirements, BDCs look to build a diversified portfolio where no single investment accounts for more than 25% of its total holdings. Typically, a company will hold more than 50 different loans spread out over 20 or more different industries.

They are also required to maintain a low amount of leverage. The government prohibits BDCs from acquiring more debt than equity. By law, the highest debt-to-equity ratio allowed is 1:1. For comparison, investment banks are often levered as high as 30:1.

I want to make something clear. I’m not saying you should run out and invest every dime you have into business development companies. There is plenty more to learn about them before investing than I can include in a couple pages here.

But there is no denying that with BDCs, you can share the same advantages as insiders that own shares of the world’s fastest-growing private companies… long before the rest of the crowd even gets a chance.

[Note: Business development companies aren’t the only way that retail investors can access the previously untouchable private market. In fact, another investment gives you a backdoor into the market where Mitt Romney made his millions. For years, this arena has been off-limits to investors like you and me. But thanks to StreetAuthority’s latest research, we’ve found a way you can access this underground market. You can learn more about BDCs — and this “second” way to access the private markets — by clicking here now.]

Regards,

Bob Bogda
Managing Editor, StreetAuthority.com

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Disclosure: StreetAuthority owns shares of HTGC and MAIN as part of the company’s various real-money portfolios. In accordance with company policies, StreetAuthority always provides readers with at least 48 hours advance notice before buying or selling any securities in any “real money” model portfolio. Members of our staff are restricted from buying or selling any securities for two weeks after being featured in our advisories or on our website, as monitored by our compliance officer.