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Rating:Was Last Week Just the Latest Straw For Third Avenue? Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, December 16, 2015

Was Last Week Just the Latest Straw For Third Avenue?

News summary by MFWire's editors

It's been a rough week for Marty Whitman, 91, and also a rough decade. And more bad news is coming in.

Martin J. Whitman
Third Avenue Management
Chairman, Portfolio Manager
As fundsters and the broader investing and media world continue to reel Whitman's Third Avenue [profile] shutting off redemptions from its Focused Credit mutual fund and then saying goodbye to CEO David Barse, Charles Stein of Bloomberg points out that, "years before its distressed bond fund blew up, Third Avenue Management lost its mojo." Meanwhile, regulators aren't the only ones circling the bleeding AMG affiliate, TheStreet still thinks the fallen Focused Credit Fund should've been in hedge fund form, and Dealbreaker is getting sarcastic about it all. Oh, and the U.S. Treasury thinks that it's likely that other mutual funds will suffer the Third Avenue Focused Credit Fund's fate.

Yesterday the San Francisco-based Sparer Law Group unveiled an investigation into Third Avenue's gating of the following fund, and this morning New York-based Zamansky unveiled a similar investigation. Sparer, self-described as "a leading law firm in the field of mutual fund class action securities litigation," is already involved in a court battle over a muni bond fund that fell during the financial crisis, while Zamansky describes itself as "a leading investment fraud law firm specializing in securities, hedge fund and ERISA class action litigation, and FINRA securities arbitration." As previously reported, Massachusetts regulators and the SEC are both looking into the fall of this fund.

Meanwhile, the way Bloomberg tells it, the Focused Credit Fund blowup is only the latest in a long string of pain points for Third Avenue.

"The firm founded in 1986 by Martin Whitman has been shedding assets since before the 2008 financial crisis, hurt by poor performance and an exodus of managers," Bloomberg writes. "The money manager has also been bleeding talent since Whitman turned over his flagship Third Avenue Value Fund in 2012 to Ian Lapey after it lost 21 percent the prior year."

Fundsters watching the Third Avenue fallout should read the full Bloomberg story. The publication notes that the fund firm's AUM fell to $8 billion on November 30, 2015, from $26 billion in 2006, a 69 percent drop in nine years. Not counting the fallen Focused Credit Fund, two of Third Avenue's four funds "trail 98 percent of peers over the last five years."

With rough performance, personnel changes may as no surprise, and Barse isn't the first key departure in recent years. Bloomberg notes that Lapey, who took over Whitman's flagship fund three years ago, has since departed, and then PMs on two other funds left last year. In total, Morningstar analyst Leo Acheson tells the publication, 15 investment team members have left Third Avenue in less than three years.

"There's a concern that Third Avenue was all about Marty Whitman and that they haven't been able to make the transition to new leadership," Lawrence Glazer, managing partner at Mayflower Advisors, tells Bloomberg. "They are going to need a better story to tell before people will trust them with their money again."

"The old school style of value investing Third Avenue is known for has been out of favor," Steven Roge, PM at R.W. Roge & Co, tells Bloomberg. "It hasn't worked very well for most of the past decade." 

Edited by: Neil Anderson, Managing Editor

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