Third Avenue Funds aims for extra credit

Third Avenue Management LLC of New York today launched a mutual fund that is able to invest in a mix of credits, including bank loans, and high-yield and distressed debt. The Third Avenue Focused Credit Fund (TFCVX) is also able to invest in debtor-in-possession financing, whereby financing is provided to companies exiting bankruptcy protection. There aren't many funds that give investors access to such a mix of credits, said J. Michael Martin, president of Financial Advantage Inc., a Columbia, Md.-based investment advisory firm with $250 million in assets under management. That and the fact that it comes from Third Avenue Management — founded by legendary value investor Marty Whitman — also makes it attractive, Mr. Martin said. But ultimately, the fund has appeal because it can invest in distressed debt, Mr. Martin added. “I'm very interested in this because of the environment we're in,” he said. Economic circumstances, he added, have created a plethora of opportunities in distressed debt. Jeff Gary, manager of the new Third Avenue Fund, concurs that the current market conditions present an attractive environment for investing in distressed debt. But he added that it would be a mistake to assume that's where the only opportunities can be found. For example, right now, the fund is invested more in bank-loan- and capital-infusion-financing deals, plus “select” distressed securities and high-yield bonds, Mr. Martin said. The junk bond market has become particularly tricky because the dramatic run-up in bond prices has made finding value in that market more difficult, he said. “But even with the run-up that has occurred since March, the market is still trading … at a pretty decent discount,” said David Barse, chief executive of Third Avenue Management.