Thursday, December 10, 2015

HOT BREAKING: High-Yield Fund Blocks Investor Withdrawals

Prepare for panic in the junk bond market.

Third Avenue Management’s Focused Credit Fund has decided to stop fulfilling investor sell order and instead liquidate the fund.

The fund specializes in risky, high-yielding bonds. Ther fund cited difficult trading conditions for its securities.

Investors withdrew a net $1.1 billion from the fund so far this year, through Tuesday, including $120.6 million in the first six trading days of this month, according to Morningstar.

Recently the Fund had  about $2.5 billion in assets and had recently shrunk to $788 million as investors rushed to redeem their shares because of weakness in the junk bond market, according to the New York Times.

This year through Wednesday, the fund posted a 27% loss, the worst performance among high-yield funds, according to Morningstar Inc.

In a letter to shareholders explaining the decision, Third Avenue’s chief executive, David M. Barse, said that investor requests for redemptions, along with a “general reduction of liquidity in the fixed-income markets” made it impracticable for the fund to “create sufficient cash to pay anticipated redemptions without resorting to sales at prices that would unfairly disadvantage the remaining shareholders.”

According to the company, the remaining assets in the fund will be put into a liquidating trust and sold off gradually, the idea being to not drive down prices too sharply. Notes NYT, this process could last more than a year, which means current investors in the fund may have to wait at least that long to get their money back.

The entire letter is here.


  1. And the Fed hasn't even raised rates yet...

    1. They can't, because they can't afford the debt service.