December 14, 2015 Comments (0) Blog, Securities Fraud

Recovery of Third Avenue Focused Credit Fund Investment Losses

(Last Updated On: December 16, 2015)

Have you suffered losses in the Third Avenue Focused Credit fund?  If so, the securities attorneys of The White Law Group may be able to help you recover those losses from the brokerage firm or financial adviser that recommended the investment.

According to reports, Third Avenue Management (“Third Avenue”) has announced that it has shuttered its Third Avenue Focused Credit fund and has placed the fund’s remaining assets into a liquidating trust.  Shareholders will reportedly receive interests in the trust, which will then make distributions to those shareholders as income is received and assets are sold.

Third Avenue Focused Credit was an open-ended fund that invested heavily in low-quality distressed debt.  Lower-quality and distressed debt can be particularly illiquid, and the fund’s heavy concentration appears to have made it vulnerable to a liquidity crunch.

Certain investment strategies are not suited to an open-ended format like the fund’s because it demands daily liquidity to pay out shareholder redemptions.  That mismatch, along with Third Avenue’s mismanagement, likely contributed to the fund’s failure.

Normally when an open-end mutual fund is liquidated, its shareholders are given advanced notice and the opportunity to redeem their investment through the liquidation date.  During this period, the fund will sell holdings and use the proceeds to pay out redemptions.  A final pro-rata distribution is then paid to any remaining shareholders on the liquidation date.

Third Avenue appears to have been unable to follow this procedure because the fund invested so heavily in illiquid bonds.  When its performance deteriorated, shareholders reportedly began asking for their money back and Third Avenue was unable to sell those bonds without doing so at fire sale prices.  This lack of liquidity is allegedly what prompted Third Avenue to “gate” most of the remaining assets in the fund by placing them in a liquidating trust.

If your financial adviser over-concentrated your portfolio in the Third Avenue Focused Credit fund, then you may have a viable claim to recover your losses.  Financial advisers are required to make suitable investment recommendations, accounting for your age, income, net worth, investment experience, and investment objectives.  Diversification is the key to reducing risk.  As such, over-concentrated exposure to any sector or investment—particularly low-quality distressed debt—can be unsuitable for many investors.

The White Law Group is opening an investigation into the liability that brokerage firms and financial advisers may have for over-concentrating their clients’ portfolios in the Third Avenue Focused Credit fund.

If you lost money investing in the Third Avenue Focused Credit fund and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312-238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.  For more information on the firm and its representation of investors in FINRA arbitration claims, visit http://www.whitesecuritieslaw.com.