Tag Archives: junk

UPDATE 3-Third Avenue parts with CEO soon after collapse of junk bond fund -WSJ

The collapse of Third Avenue’s Focused Credit Fund jolted Wall Street and renewed worries about the difficulty of trading securities on the U.S. bond marketplace. New York-primarily based Third Avenue is a relatively modest investment manager with fund assets that totaled $ ten billion at the beginning of the year.

A security guard at Third Avenue’s headquarters said on Sunday that Barse had been let go and was not allowed back in the creating, the Wall Street Journal reported.

A Third Avenue representative declined to comment. Barse did not respond to calls. His function e mail bounced back with the message “undeliverable”.

Third Avenue’s Focused Credit Fund was overwhelmed with heavy losses and surging investor net withdrawals, forcing Barse to abruptly liquidate the fund and block redemptions.

The redemptions and losses more than the previous year cut the size of the Third Avenue Focused Credit Fund to $ 789 million from almost $ three billion. Run by Tom Lapointe, the fund bet on distressed situations, such as the bankruptcy-related claims of Lehman Brothers. In a letter to investors last year, Lapointe, who could not immediately be reached for comment, stated distressed assets in his portfolio had been not necessarily illiquid or hard to trade.

The fund’s collapse is a blow to the reputation of Third Avenue Founder Marty Whitman, regarded the dean of American vulture investing. He hired Barse in 1991 to oversee the firm’s operations so he could spend much more time pursuing his own investment techniques.

Whitman could not be reached for comment.

The blow-up of the Focused Credit Fund was the most significant mutual fund failure considering that the economic crisis. The fund’s collapse shows the dangers of loading up on risky assets that are tough to trade even in excellent instances.

Just before Barse, 53, joined Third Avenue, he worked as a bankruptcy attorney defending the rights of creditors. He had been CEO of Third Avenue because 2003.

Whitman was a leader in a strategy that includes bets on the outcomes of businesses going via bankruptcy and other distressed conditions. The 91-year-old’s book titled “Distress Investing” distills decades of understanding about the ins and outs of bankruptcy restructuring.

In 2002, Affiliated Managers Group Inc purchased a majority equity stake in Third Avenue, with the remaining portion held by a broad group of workers that incorporated Whitman and Barse. Third Avenue, nonetheless, continued to operate autonomously from AMG, which holds stakes in a quantity of boutique asset management firms. AMG could not quickly be reached for comment.

(Reporting by Sam Forgione, Tim McLaughlin and Ross Kerber editing by Grant McCool)

REFILE-UPDATE 1-DoubleLine’s Gundlach says ‘real carnage’ in junk bonds ahead of Fed

NEW YORK Jeffrey Gundlach, the widely followed investor who runs DoubleLine Capital, stated on a webcast on Tuesday that the junk bond market has come below severe selling pressure ahead of the Federal Reserve’s policy meeting subsequent week.

“We are seeking at true carnage in the junk bond industry,” Gundlach stated. Gundlach also mentioned it was as well early to acquire higher-yield junk bonds and energy debt securities. “I don’t like items when they go down every single day.”

Gundlach, who has been warning that the U.S. Federal Reserve must not tighten monetary policy in December, cited a number of other asset classes that are signaling deteriorating conditions. The commodities market has been facing monstrous declines with copper rates, as an example, down 37 % since July 2014 while “the breadth of the equity industry could be the worst ever.” Gundlach characterized commodities as the “widow maker” of the markets.

General, Gundlach stated it is “unthinkable” to raise prices with junk bonds and leveraged loans struggling so a lot.

Higher Yield bonds rated CCC are at the moment at multi-year lows, down a lot more than 20 percent from their peak in June 2014.

In spite of soft development in the U.S. and weakening international development, the Fed is “hell bent” on raising interest prices since it has said in numerous speeches that it would do so, Gundlach says. “It’s feasible the Fed pulls another Lucy and the football,” Gundlach said, referring to Peanuts character Lucy yanking a football away from Charlie Brown.

Gundlach stated market place turmoil would be the primary element that delays a hike by the Fed subsequent week, its initial in nearly a decade. “If the Fed hikes, it will be a different world,” he added.

The Fed could end up searching like Sweden’s Riksbank, which hiked back in 2010 and 2011 only to have to swiftly reverse and speedily slash prices, Gundlach mentioned. The Fed “philosophically” wants to raise interest rates and will use “selectively back-tested evidence” to justify an enhance in prices, he added.

Los Angeles-primarily based DoubleLine Capital oversees $ 80 billion in assets beneath management. The DoubleLine Total Return Fund is posting returns of 2.53 % so far this year, beating 99 % of its category. The DoubleLine Core Fixed Earnings Fund is posting returns of 1.47 percent, surpassing 92 % of its category. Both funds are overseen by Gundlach.

(This version of the story was refiled to show Peanuts is suitable name in 6th paragraph)

(Reporting by Jennifer Ablan Editing by James Dalgleish and Diane Craft)