Securities regulators investigating closure of credit fund
Courtesy State of Massachusetts
State securities regulators issues a subpoena Monday as part of their investigation into a company that officials say specializes in risky bonds and was heavily concentrated in junk bonds, subordinated debt and unrated securities of distressed companies.
Secretary of State William Galvin, who oversees the securities division, said his office is probing Third Avenue Management's closure of its Focused Credit Fund and its subsequent plan of liquidation.
The fund's net asset value has dropped from $3 billion to $789 million and Galvin's office called it "the biggest retail fund to shut its doors since the 2008 crash, raising fears of a rout in the riskier parts of the bond market."
Galvin's office said the liquidation plan includes blocking further investor redemptions.
"Investors have been seeking yield in the current low interest rate environment and junk bond funds have offered an alternative but average investors do not expect to be cut off from trading in an open-end investment company registered under the 40 Act," Galvin said in a statement. "My office is opening this investigation to determine when and how this decision was made and to determine the extent of Massachusetts investors who have been impacted by this unprecedented decision on the part of fund management."
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