Monday, January 4, 2010

Top Bond Fund Pick: Third Avenue Focused Credit

Third Avenue Focused Credit (TCVFX) is a new fund with a great pedigree.  Third Avenue is a money management firm founded by legendary investor Martin Whitman who made his reputation pouring over balance sheets to uncover values that others didn't see. This kind of 'forensic' investing, so successful in his stock picking, is now being applied to the broad bond market. The trauma of the past couple of years has left much to be discovered beneath the seemingly placid surface of the bond market. The fund was rolled out this October.  It's mission is to uncover and exploit opportunites in the bond market, particularly among restructurings, distressed debt situations and high yield mispricing.  All pretty arcane to many--a far cry from just throwing money at some S&P 500 stocks--but that's what makes these guys so good.  They do homework few others have the time or expertise to do.

We heard about the fund late last summer when it was still in registration, jumped in right away when it lanched in October, and have been steadily adding it to conservative and moderate risk accounts since then. From a tactical standpoint, we have moved much of our more interest rate sensitive bond holdings to this fund.  If the economy does recover some in 2010 and interest rates rise, Treasury notes and bonds will decline in value while the holdings of a fund like TFCVX are likely to actually benefit from improved economic conditions.

The Fund is now our single largest position in our moderate risk accounts and is a top ten bond holding in our more cautious alocations.  For those of you who would like to get the latest skinny on the fund, Business Week just came out with a boring, but informative, interview with the lead manager Jeff Gary.  Here's the link.

1 comment:

  1. Good catch. That's the kind of insight we like to see.