Whitman & Third Avenue Launch Focus Credit Fund (TFCVX, TFCIX, TAVFX)

If you do not know M.J. Whitman or the Third Avenue Management Inc. family of mutual funds, then you are probably not a value investor.  Whitman and his team have been perhaps some of the deepest value investors for decades on Wall Street.  And now the fund group is launching a new fund called the Third Avenue Focused Credit Fund.   There will be two classes of shares: the investor class shares will trade under the ticker ‘TFCVX’ and the institutional class will trade under the ticker ‘TFCIX.’

The new debt and credit fund will invest in multi-rating and even unrated debt and credit.  It might not be for the faint of heart nor for widows and orphans as the fund will invest in distressed debt and distressed securities of companies which may be in default or in bankruptcy.  These can also be equities or other assets received as part of the reorganization process.

The main goal is to continue Whitman and Third Avenue’s strategy of investing in undervalued assets.  These can and will likely include junk bonds and bank loans and may include convertible bonds and preferred shares.

The fund launch is actually the first major fund launch for Third Avenue in about eight years.  Jeffrey Gary will be the head manager, and he came over to Third Avenue from BlackRock in June after heading BlackRock’s team in high-yield and distressed investing.  He has also managed high-yield and distressed investing at AIG/American General, Koch Industries, and at Cargill.

The Third Avenue Value Fund (TAVFX) has been a deep value investment vehicle and is listed as having close to $5.5 billion in assets.  The new Third Avenue Focused Credit Fund will have some minimum investments for each class of investor: $2,500 for its retail investor and $100,000 for its institutional class.   The investor class shares (TFCVX) will have an expected annual operating expense of 1.71%, including a management fee of 0.75%.  There is a fee waiver or expense reimbursements in place for one year which will reduce that figure to 1.4%.  The institutional class shares will have operating expenses of 1.27%, including a 0.75% management fee, although a fee waiver or expense reimbursement in place for one year will reduce that combined fee down to 0.95%.

The new fund will focus on high conviction investment ideas and looks as though it will limited to a core portfolio of roughly 50 to 60 companies.

JON C. OGG