The Performance of Small Business Investment Companies

Small businesses are the backbone of the U.S. economy, yet they often face the hardest time accessing long-term capital. To address this gap, Congress created the Small Business Investment Company (SBIC) program in 1958, allowing private funds to invest in small firms using leverage supported by the U.S. Small Business Administration (SBA). The natural concern is whether a government-supported structure sacrifices returns in pursuit of policy goals. This research suggests the opposite. SBIC funds have historically delivered returns that are competitive with, and often superior to, comparable private market investments.

The Performance of Small Business Investment Companies

• Brown, Hu, Robinson and Volckmann
• Financial Analyst Journal, 2026
• A version of this paper can be found here
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Key Academic Insights

SBIC funds generally outperform comparable private market peers
Using an augmented sample built from a high-response-rate SBIA survey plus MSCI, Preqin, and StepStone, the authors find that SBIC funds from vintages 2000 to 2020 earn average net IRRs of 15.9% and average MOICs of 2.2x. Relative to comparable non-SBIC private funds, average excess performance is about 3.1% to 3.5% in IRR and about 0.7x in MOIC. Median outperformance is smaller but still positive, which matters because it shows the result is not only driven by a few monster funds.

The cleaner MSCI sample confirms the result, though with smaller magnitudes
Survey data can be upward biased because poor-performing funds may be less likely to respond. The authors therefore isolate SBIC funds in the MSCI Private Capital Universe, where data come from LPs rather than GPs. In that sample, excess performance remains positive. SBICs beat comparable non-SBIC peers by about 1.1% to 1.5% in IRR and roughly 0.5x to 0.6x in MOIC on average, with positive median outperformance as well. The magnitudes are lower than in the survey sample, but the direction survives.

SBICs also outperform public market benchmarks on average
Because the MSCI sample includes full fund cash flows, the authors compute Kaplan-Schoar PMEs. For nearly all SBIC categories except a very small venture subset, average and median PMEs are above 1.0, meaning they outperform the relevant public market benchmark. Relative to comparable non-SBIC funds, SBIC PMEs are also generally stronger. That is an important result because it reframes SBICs not just as “good for policy” but as competitive from an LP portfolio perspective.

Strategy matters. Junior debt is the most consistent relative winner
On an absolute basis, equity-oriented SBICs post the highest raw returns. But relative to comparable peer funds, junior debt funds stand out most clearly, especially in IRR. Equity funds also outperform, but with more dispersion and more influence from high-performing outliers. Venture capital looks weakest, which fits the program’s mixed historical experience with venture structures and earlier policy designs.

More leverage helps, but only up to a point
The program’s signature feature is SBA (Small Business Administration) leverage, yet the paper finds that maximum leverage is not always optimal. Funds with moderate leverage often outperform those using the highest permitted leverage. In particular, the best relative IRRs often appear in intermediate leverage ranges rather than at the 2x maximum. That is a nice reminder that subsidized leverage is a tool, not magic dust.

Practical Applications for Investment Advisors

Underwriting matters more than the label

SBIC is not a strategy. It is a fund structure with leverage access, constraints, and tax features. Performance still varies materially by fund type, size, and leverage usage. Advisors evaluating SBIC exposure should focus on strategy mix, manager quality, and actual portfolio construction rather than the SBIC label alone.

Size and leverage discipline appear to matter
Larger SBIC funds tend to show better benchmark-adjusted results, and moderate leverage often looks better than maximum leverage. For allocators, that suggests caution around assuming that “more SBA leverage” automatically means “better economics.”

Junior debt deserves more attention
If the goal is relative outperformance versus private market peers, junior debt appears especially compelling in this study. That does not make it universally superior, but it does suggest that many allocators may underappreciate where the strongest risk-adjusted value in the SBIC ecosystem may sit.

Treat survey-based results with healthy skepticism, then notice they still hold up
The authors are refreshingly explicit about response bias and survivorship concerns. That is a feature, not a bug. The important point is that when they move to the less biased MSCI sample, the central conclusion remains. The outperformance gets smaller, but it does not disappear.

How to Explain This to Clients

”SBIC funds are private funds that can access SBA-backed leverage to invest in smaller U.S. businesses. You might expect that kind of policy structure to come with lower returns, but this study finds the opposite. On average, SBIC funds have outperformed comparable private funds, and in cleaner LP-sourced data they also beat public market benchmarks. The most interesting point is not that every SBIC is special. It is that a well-structured program aimed at underserved businesses appears to have created an investable segment that can work for both economic policy and private capital allocators.”

The Most Important Chart from the Paper

The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged and do not reflect management or trading fees, and one cannot invest directly in an index.

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.