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Third Avenue Management is parting ways with Chief Executive Officer David M. Barse after he announced plans last week to freeze redemptions in its troubled high-yield mutual fund, the Wall Street Journal reported, citing unidentified people familiar with the matter. Barse was let go and isn’t allowed back in the building, the newspaper said, citing a security guard at the firm’s New York headquarters.
This dramatic escalation now means that every single hedge and mutual funds will spend all Sunday night and Monday morning trying to ferret out any bonds that are especially illiquid or are mispriced
Meanwhile, the WSJ article it quotes (admittedly updated) said that this ferreting out was already done last week:
On Dec. 10, the day the firm announced it was halting withdrawals, traders at Wall Street banks circulated a list of bonds offered for sale by a single seller that matched many of the largest holdings reported by Third Avenue, said several hedge-fund managers who saw the list. Most hedge funds passed on the portfolio, which contained deeply distressed bonds and private equity investments that are hard to trade.
My two takeaways (from the WSJ article):
1) (Quoting one of the commenters): "Now consider that the CEO was in that position for 24 years and swiftly shown the door. There is a lot more going on here to warrant this type of draconian action by the BOD."
2) The fund did not technically prevent redemptions - it redeemed in kind, by distributing shares of a trust that was created to hold and liquidate the portfolio. It is the terms of the trust that bar its owners from cashing out.
There is, I think, some evidence that Mr. Barse was hard to love. It's not clear that "CEO for 24 years" was exactly correct (there were a couple firms, a couple titles and a gap). It's pretty clear that TAM has been in turmoil for years, which makes a "fire the coach" reaction understandable - especially if the coach has been assuring the board that there was no problem with values on the illiquid securities ... or the concentration in the illiquid securities. And, in this case, over half of the board had a substantial investment in - which means lost a lot of their own money in - the Focused Credit fund.
Here's the sort of caution we'd written back in February:
In sum, the firm’s five mutual funds are down by $11 billion from their peak asset levels and nearly 50% of the investment professionals on staff five years ago, including the managers of four funds, are gone. At the same time, only one of the five funds has had performance that meets the firm’s long-held standards of excellence.
Many outsiders noted not just the departure of long-tenured members of the Third Avenue community, but also the tendency to replace those folks with outsiders. The most prominent change was the arrival, in 2014, of Robert Rewey, the new head of the “value equity team” and formerly a portfolio manager at Cramer Rosenthal McGlynn, LLC, where his funds’ performance trailed their benchmark (CRM Mid Cap Value CRMMX, CRM All Cap Value CRMEX and CRM Large Cap Opportunity CRMGX) or exceeded it modestly (CRM Small/Mid Cap Value CRMAX). Industry professionals we talked with spoke of “a rolling coup,” the intentional marginalization of Mr. Whitman within the firm he created and the influx of outsiders.
Didn't recall that. Thanks. Sounds like this latest problem was just the last straw.
You noted: "It's not clear that "CEO for 24 years" was exactly correct (there were a couple firms, a couple titles and a gap)."
Hence the very careful wording on Third Ave's web page: "Mr. Barse has led investment boutique Third Avenue Management LLC for more than two decades ..."
Not necessarily continuously since 1991, and not as CEO. The WSJ took this and reinterpreted it as: "Mr. Barse had led Third Avenue since 1991, according to the company’s website ..."
and captioned its picture as: " David Barse, ... chief executive since 1991"
FWIW, the Reuters article got it right (or at least different): "He had been CEO of Third Avenue since 2003"
Comments
Regards,
Ted
(Click On Article Title At Top Of Google Search)
https://www.google.com/#q=Third+Avenue+CEO+David+Barse+Departs+wsj
MutualFundWire.Com Slant:
http://www.mfwire.com/common/artprint2007.asp?storyID=53119&wireid=2
This dramatic escalation now means that every single hedge and mutual funds will spend all Sunday night and Monday morning trying to ferret out any bonds that are especially illiquid or are mispriced
Meanwhile, the WSJ article it quotes (admittedly updated) said that this ferreting out was already done last week:
On Dec. 10, the day the firm announced it was halting withdrawals, traders at Wall Street banks circulated a list of bonds offered for sale by a single seller that matched many of the largest holdings reported by Third Avenue, said several hedge-fund managers who saw the list. Most hedge funds passed on the portfolio, which contained deeply distressed bonds and private equity investments that are hard to trade.
My two takeaways (from the WSJ article):
1) (Quoting one of the commenters): "Now consider that the CEO was in that position for 24 years and swiftly shown the door. There is a lot more going on here to warrant this type of draconian action by the BOD."
2) The fund did not technically prevent redemptions - it redeemed in kind, by distributing shares of a trust that was created to hold and liquidate the portfolio. It is the terms of the trust that bar its owners from cashing out.
Here's the sort of caution we'd written back in February:
In sum, the firm’s five mutual funds are down by $11 billion from their peak asset levels and nearly 50% of the investment professionals on staff five years ago, including the managers of four funds, are gone. At the same time, only one of the five funds has had performance that meets the firm’s long-held standards of excellence.
Many outsiders noted not just the departure of long-tenured members of the Third Avenue community, but also the tendency to replace those folks with outsiders. The most prominent change was the arrival, in 2014, of Robert Rewey, the new head of the “value equity team” and formerly a portfolio manager at Cramer Rosenthal McGlynn, LLC, where his funds’ performance trailed their benchmark (CRM Mid Cap Value CRMMX, CRM All Cap Value CRMEX and CRM Large Cap Opportunity CRMGX) or exceeded it modestly (CRM Small/Mid Cap Value CRMAX). Industry professionals we talked with spoke of “a rolling coup,” the intentional marginalization of Mr. Whitman within the firm he created and the influx of outsiders.
David
You noted: "It's not clear that "CEO for 24 years" was exactly correct (there were a couple firms, a couple titles and a gap)."
Hence the very careful wording on Third Ave's web page: "Mr. Barse has led investment boutique Third Avenue Management LLC for more than two decades ..."
Not necessarily continuously since 1991, and not as CEO. The WSJ took this and reinterpreted it as:
"Mr. Barse had led Third Avenue since 1991, according to the company’s website ..."
and captioned its picture as: " David Barse, ... chief executive since 1991"
FWIW, the Reuters article got it right (or at least different): "He had been CEO of Third Avenue since 2003"
I've got to read more carefully.