On Thursday, Third Avenue Management’s CEO David Barse wrote to the fund’s shareholdersthat the firm was shuttering its embattled Focused Credit Fund.
The letter said the fund plans to liquidate the high yield bond fund on December 16. It also noted that it would not allow further investor redemptions.
The following day after the letter was made public, Barse was let go and he isn’t being allowed back in the firm’s New York office building, the Wall Street Journal reports citing a building security guard. The Wall Street Journal also added that emails sent to Barse over the weekend were “undeliverable.”
Barse had been with Third Avenue for 24 years. Before joining Third Avenue in 1991, Barse worked as a bankruptcy lawyer, according to his bio on the company’s website.
Third Avenue’s Focused Credit Fund, led by Thomas Lapointe, launched in 2009. By 2013, the fund managed around $2 billion in assets. Currently, the fund has $789 million in assets, according to the Wall Street Journal.
The fund has fallen 26.8% year to date, data from Morningstar shows. Meanwhile, the average high yield bond fund is down -3.83% year to date, the data shows.
Business Insider reached out to a spokesperson with the firm for comment.
If you are familiar with what’s happening at Third Avenue Management, feel free to reach out to [email protected] We’ll be discreet.
Here’s a copy of the letter Barse sent shareholders:
Dear Fellow Shareholders,
I am writing to inform you that the Board of Trustees of the Third Avenue Trust has adopted a Plan of Liquidation for the Third Avenue Focused Credit Fund (“FCF”). Pursuant to this Plan, on or about December 16, 2015, there will be a distribution to all FCF shareholders of the Fund’s cash assets not required for the expenses of the Fund and its liquidation. The remaining assets have been placed into a liquidating trust (the “Liquidating Trust”) and interests in that trust will also be distributed to FCF shareholders on or about December 16, 2015. These two distributions will constitute the full redemption for all shares of FCF and existing FCF shareholders will all become beneficiaries of the Liquidating Trust, which will make periodic distributions as cash is received for the remaining investments. The record date for these distributions is December 9, 2015, so no further subscriptions or redemptions will be accepted. Interests in the Liquidating Trust will not trade and will, in general, be transferable only by operation of law.
We believe that, with time, FCF would have been able to realise investment returns in the normal course. Investor requests for redemption, however, in addition to the general reduction of liquidity in the fixed income markets, have made it impracticable for FCF going forward to create sufficient cash to pay anticipated redemptions without resorting to sales at prices that would unfairly disadvantage the remaining shareholders.
In line with its investment approach, FCF has some investments in companies that have undergone restructurings in the last eighteen months, and while we believe that these investments are likely to generate positive returns for shareholders over time, if FCF were forced to sell those investments immediately, it would only realise a portion of those investments’ fair value given current market conditions. We believe that doing so would be contrary to the interests of all of our shareholders, which is why we have taken steps to protect shareholder value by returning cash and implementing the Liquidating Trust to seek maximum value for these investments.
FCF has a distinct and specialised approach to credit investing and has no overlap with other Third Avenue products, which consist almost entirely of exchange-traded equity securities.
Third Avenue will manage the Liquidating Trust in order to obtain the best overall outcome for the beneficiaries. Third Avenue will not charge any fee for those services. Third Avenue anticipates that there will be periodic distributions from the Liquidating Trust as income is received and as assets are disposed of at reasonable prices. Third Avenue anticipates that the full liquidation process may take up to a year or more before a final distribution is made in order to achieve favourable results.
Third Avenue is extremely disappointed that we must take this action. When we launched FCF in 2009, we expected not only to add a differentiated product to our fund line-up which complemented our platform but would hopefully provide outsized returns in the credit markets, including investments in special situations. As the Fund grew over the years, we were able to find unique and special investments. Unfortunately, the present environment has harmed our ability to successfully implement that strategy. If you have additional questions, please contact your sales representative.
Sincerely, David Barse CEO,
Third Avenue Management
Here’s a chart of how the fund’s performed since inception:
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