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Forget Junk, Many 3rd Ave Holdings are Trash – The Street

unloading truck in a mountain of trash

Just how bad are the assets in Third Avenue Management’s Focused Credit Fund? They are bad enough that one has to wonder if it is even fair to call them assets. FULL ARTICLE

 

Comments
  • Cougar
    CougarJanuary 23, 2016"This is really a non-story as it is merely the risk-reward pay-off demonstrating high risk means that you can lose money If there is a story, and I'm sure there is, it would be around the marketing of the fund and the transparency used to explain its portfolio construction and management. Certainly from a regulatory perspective its disclosure appears fine.…"
  • SliderDecember 17, 2015"Excellent article! While other media outlets are reporting this incident as a portent of things to come in the broader debt market, this piece sticks to the facts regarding Third Avenue's actual portfolio. The distressed bond market is like another universe when compared to the investment grade and high yield markets. Orders in distressed bonds can go unfilled for weeks if not months, so offering anything close to same day redemptions to investors is laughable. Fun fa…"
  • Wolfman
    WolfmanDecember 17, 2015"To be fair, the fund's prospectus states the fund might look to make investments in bankrupt companies and that those holdings could be difficult to sell. Also, the fund is a high-yield and distressed fund, so by definition the holdings are not going to be pristine. Even so, this fund took "slumming it" to new levels.…"
  • Goose
    GooseDecember 17, 2015"I echo Merlin’s thoughts on the investors in this fund. Perhaps shades of Captain Renault in Casablanca? https://youtu.be/qmywwiZth5E Rick: How can you close me up? On what grounds? Renault: I am shocked, shocked to find that gambling is going on in here! Croupier: [hands Renault money] Your winnings, sir. Renault: Oh, thank you very much. Everybody out at once! I was really struck this week by the media narrative around this news. The headline risk for all high yield…"

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5 Comments on "Forget Junk, Many 3rd Ave Holdings are Trash – The Street"

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Slider
Guest
As regards the article itself, not clear to me why the author is being so hard on Third Avenue Mgmt. Just based on the article (I did not research, googling, etc… on my own) it seems that the fund prospectus clearly stated the types of assets they were investing in. No where did I read anything where mgmt was engaged in any illegal activity nor did I read anything about them executing trades at inappropriate levels (if that could in fact be gauged!), they were just victims of bad decisions. Investors know and expect investments in risky assets could easily… Read more »
Goose
Guest
I echo Merlin’s thoughts on the investors in this fund. Perhaps shades of Captain Renault in Casablanca? https://youtu.be/qmywwiZth5E Rick: How can you close me up? On what grounds? Renault: I am shocked, shocked to find that gambling is going on in here! Croupier: [hands Renault money] Your winnings, sir. Renault: Oh, thank you very much. Everybody out at once! I was really struck this week by the media narrative around this news. The headline risk for all high yield funds was huge. The theme of many articles I saw was, “Third Avenue = HY, run for your lives”. I think… Read more »
Wolfman
Guest

To be fair, the fund’s prospectus states the fund might look to make investments in bankrupt companies and that those holdings could be difficult to sell. Also, the fund is a high-yield and distressed fund, so by definition the holdings are not going to be pristine. Even so, this fund took “slumming it” to new levels.

Slider
Guest
Excellent article! While other media outlets are reporting this incident as a portent of things to come in the broader debt market, this piece sticks to the facts regarding Third Avenue’s actual portfolio. The distressed bond market is like another universe when compared to the investment grade and high yield markets. Orders in distressed bonds can go unfilled for weeks if not months, so offering anything close to same day redemptions to investors is laughable. Fun fact: One of Third Avenue’s positions was in a tire company that had an ongoing tire fire?! I swear you can’t make this stuff… Read more »
Cougar
Guest

This is really a non-story as it is merely the risk-reward pay-off demonstrating high risk means that you can lose money

If there is a story, and I’m sure there is, it would be around the marketing of the fund and the transparency used to explain its portfolio construction and management. Certainly from a regulatory perspective its disclosure appears fine.

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