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Thursday, December 17, 2015

Deja Avenue? Another Junk Bond Fund Is Bleeding

News summary by MFWire's editors

Another junk bond mutual fund is bleeding. This isn't Third Avenue's now-infamous Focused Credit Fund all over again, or is it?

Marc Lasry
Avenue Capital Group
Chairman, Chief Executive Officer, Co-Founder
Katherine Burton of Bloomberg highlights the recent woes of the two-star, $821.2-million, three-year-old Avenue Credit Strategies Fund. Per Morningstar's estimates, the Avenue Credit Strategies Fund just suffered $206 million in net outflows and a loss of five percent, all in the first 14 days of December. The fund is down 11 percent year-to-date, and as recently as November 2014, the fund had $2 billion in AUM.

Last week New York-based Third Avenue began shutting down its $789-million Focused Credit Fund. That move that has triggered an avalanche of media coverage and attracted both regulatory and litigious interest.

Marc Lasry, chairman/CEO and co-founder of New York-based Avenue Capital Group, says that the Avenue Credit Strategies Fund is not the Third Avenue Focused Credit Fund all over again.

"We have a well-positioned portfolio and our illiquid assets are in the single digits," Lasry reportedly told Bloomberg.

Yet the two high yield funds have more in common than just similar branding and addresses on the east side of midtown Manhattan. Per his Avenue Capital Group bio, senior PM Jeff Gary worked as a PM at Third Avenue prior to joining Avenue Capital Group in 2012 and launching its Avenue Credit Strategies Fund. At Third Avenue, Gary launched none other than the Third Avenue Focused Fund back in 2009, co-PMing it alongside Tom Lapointe. Gary left Third Avenue five years ago, Lapointe still PMs the Third Avenue Focused Fund.

While Third Avenue Management is primarily a mutual fund shop specializing in value equity investing, Avenue Capital Group is primarily a private equity and hedge fund shop specializing in distressed debt. The Avenue Credit Strategies Fund is Avenue Capital Group's only open-end mutual fund (it also runs a similar, $168MM closed-end fund), which amounts to less than one-twelfth of its $12.7 billion in AUM as of November 30, 2015. 

Edited by: Neil Anderson, Managing Editor

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