The junk bond market is in turmoil. High-yield bond mutual funds are getting hit with massive redemption requests just as bond prices are tumbling to multi-year lows. Related to this, billionaire Marc Lasry on Monday offered support to a junk bond mutual fund hemorrhaging assets at his Avenue Capital Group as worried investors pile out of high-yield bonds amid a market rout.
As reported by ValueWalk, junk-bond fund Third Avenue Focused Credit Fund recently “pulled a fast one” on investors requesting redemptions by transferring all assets into a management trust so they didn’t have to get permission from the SEC to effectively halt investor paybacks. This questionable maneuver is under investigation by Massachusetts regulators.
Carlson Capital's Black Diamond Arbitrage Partners fund added 1.3% net fees in the first quarter of 2021, according to a copy of the firm's March 2021 investor update, which ValueWalk has been able to review. Q1 2021 hedge fund letters, conferences and more At the end of the quarter, merger arbitrage investments represented 89% of Read More
Details on Avenue Credit Strategies Fund
It has come to light that Marc Lasry’s once $2 billion and now $884 million Avenue Credit Strategies Fund is managed by the same portfolio manager who in 2009 helped launch the Third Avenue Focused Credit Fund, which shut down last week and has now stopped investor redemptions with a unusual move.
Jeff Gary joined Avenue Credit from Third Avenue in 2012, where he was the fund manager until December 2010.
The Avenue Credit Strategies Fund’s total return is -10% so far this year, underperforming the -3.83% average decrease in the high-yield bond category, based on data from Morningstar.
Third Avenue’s high-yield fund was off over 25% when it closed with around $800 million in assets.
Statement from Marc Lasry
In a phone interview with Reuters on Monday, Lasry sought to draw distinctions between the two junk bond funds. “We have a diversified and well-positioned portfolio and our illiquid assets are in the single digits,” Lasry commented about his fund.
Third Avenue, on the other hand, noted it had a projected 20% of its assets in illiquid securities.
Also keep in mind that Lasry’s Avenue Capital has more than $12 billion in assets, versus under $10 billion at Third Avenue Capital.
“I think overall redemptions at some point are going to slow down across the market,” Lasry opined. “I’m not sure if that will be tomorrow or next week, but people are going to start putting money back into the market at some point.”