Avenue Capital Management’s junk bond fund voluntarily stopped reporting its daily asset under management (AUM) figures to the top tracking firms of the mutual fund industry, according to Reuters. Billionaire Marc Lasry is the co-founder and chief executive officer of Avenue Capital.
The report indicated that research heads of Morningstar and Lipper confirmed that they did not receive the daily AUM figures from Avenue Credit Strategies Fund since mid-December.
Jeff Tjornehoj, head of Americas research at Lipper, unit of Thomson Reuter said, Avenue Capital is not required to report the daily AUM figures of its junk bond fund, but he commented that it was “very unusual” not to do it.
The Electron Global Fund was up 2% for September, bringing its third-quarter return to -1.7% and its year-to-date return to 8.5%. Meanwhile, the MSCI World Utilities Index was down 7.2% for September, 1.7% for the third quarter and 3.3% year to date. The S&P 500 was down 4.8% for September, up 0.2% for the third Read More
Avenue Capital Credit Strategies Fund experienced client withdrawals
According to Reuters, Avenue Capital’s Credit Strategies Fund decided to stop reporting its daily AUM levels after experiencing client withdrawals and huge losses on the heels of the biggest blow up in the mutual fund industry since 2008.
The report indicated that Credit Strategies Fund was negatively impacted after Third Avenue Capital announced its decision to liquidate its Focused Credit Fund on December 9 although the funds were unrelated.
Data from Lipper indicated that investors pulled $262 million from Avenue Capital’s junk bond fund in reaction to Third Avenue Capital’s announcement.
Avenue Capital’s Credit Strategies Fund lost approximately 40% of its $1.2 billion in assets since October. The fund’s current assets are around $650 million to $700 million (about 15% in cash holding and less than 5% in illiquid investments), according to people familiar with the situation.
Data from Morningstar showed that the total return of Credit Strategies Fund was negative 13.35% last year, worse than 98% of high-yield peers. The fund’s total return this year so far is -1.49%.
Lasry says Reuters report was misleading
A spokesman for Avenue Capital told Reuters, “Our fund investors receive all key information on the fund, either directly or through our website. The fund also continues to report its daily net asset value to the independent research firms.
On the other hand, Mr. Lasry responded to the report in a statement to CNBC. According to him, “A media report this evening was misleading and based on dated information.” He said the fund’s performance is “in-line with the high-yield market.”
“Our fund reports our net asset value (NAV) to all data services on a daily basis. Importantly, the fund’s investors receive all current key information on the fund, either directly or through our website, and they know that we ended the practice of providing daily AUM reports to Morningstar and Lipper in mid-December,” added Mr. Lasry.
Furthermore, Mr. Lasry emphasized that Avenue Capital will start reporting its AUM on a monthly basis instead of daily basis to the two data services in February. According to him, a majority of funds and fund companies report their AUM levels on a monthly basis.
Lasry remains optimistic on the U.S. economy
Separately, Lasry told CNBC that the U.S. economy is not headed towards a recession, and the current financial climate still offers good investment opportunities.
“I don’t think we’re going into a recession; I think it’s whether we’re growing at 1 or 2 percent. So the fact that you’ve got lower GDP, that’s fine, but at the end of the day the U.S. economy is doing fine, said Lasry during a recent interview on Fast Money, Half Time Report.
He also thinks that investors should not panic because there are opportunities out there. He said, “Invest in solid companies and you’ll end up doing pretty well.” He finds “a ton of opportunities” in the energy sector, and his firm is acquiring debt with a coupon of about 12%.