Articles Tagged with Third Avenue Focused Credit Fund

Reuters is reporting that the Securities and Exchange Commission is examining the possible liquidity risks involved in high-yield bond funds. The probe comes following the collapse of the Third Avenue’s Focused Credit Fund (TFCVX) in early December. That has been touted as the largest mutual fund failure since the financial crisis of 2007.

The fund failed because of its inability to meet so many investor redemption request following heavy losses in the junk bond market. When the fund couldn’t find more buyers, it ended up having to suspend the redemptions and liquidate.

Now, regulators want to look into the ways in which mutual funds deal with liquidity risks and how such disruptions can impact not just shareholders but also the wider market. Reuters said that last month the SEC notified mutual funds and exchange-traded funds that it wants information about how securities that are less liquid are priced and whether certain parties have questioned these prices.

In particular, reports the news agency, the Commission has specifically asked for daily internal illiquidity calculations from 8/31/15 to 12/15/15, the names of large fund shareholders, disclosures related to liquidity, redemption activity, portfolio composition quality for each fund, and the daily outflow and inflow of information. Fund mangers were reportedly given only 24 hours to provide a little over half of the information requested and another week to hand over the rest of the documents.

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