Third Avenue Focused Credit Fund
A firm founded by legendary vulture investor Martin Whitman is barring investor withdrawals while it liquidates its high-yield bond fund, an unusual move that highlights the severity of the monthslong junk-bond plunge that has swept Wall Street.
The decision by Third Avenue Management LLC means investors in the $789 million Third Avenue Focused Credit Fund may not receive all their money back for months, if not more.
Third Avenue said poor bond-market trading conditions made it almost impossible to raise sufficient cash to meet redemption demands from investors without resorting to fire sales of assets. The move at Third Avenue Focused Credit Fund is intended to facilitate an orderly liquidation of the fund, which recently had $789 million in assets, down from more than $2.4 billion earlier this year. It comes amid redemption requests at the fund and reduced liquidity in some parts of the bond market.
The move at the Third Avenue mutual fund comes at a time of widespread uneasiness about holdings of hard-to-sell securities in funds that trade daily or intraday.
Third Avenue CEO Leaves Firm After Collapse of Focused Credit Fund
Third Avenue Management LLC has parted ways with Chief Executive Officer David Barse after the collapse of the company’s Focused Credit bond fund last week. The collapse of Third Avenue’s Focused Credit Fund jolted Wall Street and renewed worries about the difficulty of trading securities on the U.S. bond market. New York-based Third Avenue is a relatively small investment manager with fund assets that totaled $10 billion at the beginning of the year.
Third Avenue’s Focused Credit Fund was overwhelmed with heavy losses and surging investor net withdrawals, forcing its CEO David Barse to abruptly liquidate the fund and block redemptions.
The redemptions and losses over the past year cut the size of the Third Avenue Focused Credit Fund to $789 million from nearly $3 billion. Run by Tom Lapointe, the fund bet on distressed situations, such as the bankruptcy-related claims of Lehman Brothers.
The blow-up of the Focused Credit Fund was the biggest mutual fund failure since the financial crisis.