MutualFundWire.com: Is This the End For Third Avenue and Its Triple-C Cowboys?

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Tuesday, December 22, 2015

Is This the End For Third Avenue and Its Triple-C Cowboys?

It's been a week and a half since the folks at Third Avenue [profile] shocked the investing world by barring redemptions from their formerly high-flying Focused Credit Fund. Barron's wonders whether the AMG-backed value shop can survive the fallout.

Sean Healey
AMG
Chairman, Chief Executive Officer

Meanwhile, the WSJ offers three more takes on the Focused Credit Fund "fiasco." The chief of a $13-billion hedge fund shop is calling the Third Avenue folks "triple-C cowboys." An RIA writing in InvestmentNews called out Third Avenue for having "absolutely no plan for a mass exodus." The head of the J.P. Morgan high-yield bond desk, Wall Street's biggest, reassures the WSJ that "you can still make good money in high yield," and Morningstar notes that, while high yield bonds are down 4.8 percent year-to-date, the median high-yield bond fund is only down about 3.8 percent. Morningstar's Christine Benz and Russ Kinnel and MarketWatch's Chuck Jaffe try to help investors learn some lessons from the Third Avenue Focused Credit Fund's demise. Reuters points out that Third Avenue built up a $200-million cash reserve in the fund and still couldn't save it. Morningstar downgrades its parent rating of Third Avenue, calling out the Focused Credit Fund's fall as reflecting "a profound management and governance failure." And Bloomberg notes that similarly-branded high-yield bond fund PMed by an ex-PM of the fallen Third Avenue fund moved 45 percent of its AUM into cash after big redemptions in the wake of the Third Avenue Focused Credit Fund fallout.

On Saturday Amy Feldman of Barron's pondered "how the mighty have fallen." She writes that, looking back on a May Barron's piece on Third Avenue, the publication was "too optimistic with regard to the firm's outlook." AMG owns 60 percent of Third Avenue, and AMG CEO Sean Healey says he is "confident in the firm's future path." Yet Barron's, citing KBW analyst Robert Lee, worries that if redemptions pile up for Third Avenue's remaining four mutual funds, "AMG might change course and sever the relationship."

And therein lies the rub. "The big unknown," Barron's writes, "is the extent to which the credit fund's failure will cast a shadow on its remaining funds." The publication concludes that "at worst," Third Avenue "might not survive."

Printed from: MFWire.com/story.asp?s=53163

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