Third Avenue Launches Credit Fund

NEW YORK (TheStreet) -- Third Avenue, which is well known for its value fund, Third Avenue Value(TAVFX Quote), wants to move into a timely area -- distressed debt.

The firm believes that its expertise in spotting undervalued assets is a natural fit for finding undervalued debt, and that the ongoing credit crisis will provide plenty of investment opportunities.

The firm brought in Jeffrey Gary to lead the fund, which is named Third Avenue Focused Credit(TFCVX Quote). He was former head of Blackrock's high- yield and distressed investment team.

The prospectus says the fund "seeks total return from a combination of capital appreciation and interest income, by focusing capital in our highest-conviction ideas across the credit spectrum."

According to the prospectus, inefficient credit markets are providing opportunities for Third Avenue's experienced management, who have past experience in this segment of the market.

Focused Credit will follow the same asset allocation strategy as other Third Avenue funds by concentrating assets in their best ideas. Marty Whitman's Third Avenue Value recently held more than 50% of assets in the top six holdings.

Third Avenue funds are not constrained by style, sector or asset class. In July, I compared iShares Hong Kong(EWH Quote) and Third Avenue Value(TAVFX Quote) because Marty Whitman's heavy bets on Hong Kong real estate led to a substantial overlap between these two funds.

Focused Credit will hold 50 to 60 securities, but based on the other funds, investors should expect a high concentration in the manager's best ideas.

Few mutual fund companies allow their managers the type of latitude given at Third Avenue, where managers are more akin to hedge fund managers who have the freedom to go where they believe the best opportunities lie.