Illiquid assets at Third Avenue Management’s junk-bond fund skyrocketed before it imploded last week, underscoring an opaque corner of risk in the mutual fund industry that corporate governance experts worry is not policed by outside directors.
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Commenting this morning (December 14), Mr Bezalel said: “Recent events justify why we have adopted [a] barbell approach of having our top picks across high yield (primarily European high yield), countered by high quality investment grade credits and a material position in high quality government bonds such as US Treasuries, Australian government bond and New Zealand government bonds”.
Last week, the fund announced it was liquidating and blocked investors from getting their money back.
The move comes amid a meltdown in the junk bond sector.
The high-yield debt market has been experiencing a dramatic sell-off over the past few days after the closure of the Third Avenue Focused Credit Fund. You just do not know.
“Today’s announcement is a step that enables Third Avenue to return to its roots, with broad-based leadership by the senior investment team”, Third Avenue founder Martin Whitman said in a statement.
Meanwhile, Third Avenue’s long-time Chief Executive Officer David Barse has left the firm in a mutually agreed upon departure.
High-yield funds tend to underperform when the economy is in a recession, when companies that carry heavy debt have more difficulty making money and paying their creditors. “What the markets did was price their debt at not affordable”, Russell said. Visit MarketWatch.com for more information on this news. In a 2012 investor commentary, lead fund manager Thomas Lapointe challenged the illiquidity “myth” of distress investing and reassured investors that keeping excess cash on hand and limiting assets to less than $3 billion would allow the fund to meet its financial obligations. “I think there’s real opportunity in the market”.
Third Avenue had sold a 60 percent stake in the company to asset manager Affiliated Managers Group in 2002, while the remaining 40 percent stayed largely in the hands of the firm’s senior executives. But some experts say these boards do too little. Pursuant to this Plan, on or about December 16, 2015, there will be a distribution to all FCF shareholders of the Fund’s cash assets not required for the expenses of the Fund and its liquidation.
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“Furthermore, the other concern we have had for a while is some sort of contagion to European credit as credit in emerging markets and U.S. credit have continued to come under pressure”. “There’s this very narrow window here, where if people decide that it’s time to reduce risk and take tax losses, that the market has a structural problem”.
