High Yield Problems Isolated, Not Crisis Level Says AB Fund Manager

The problems that led to the collapse and subsequent closing of Third Avenue’s high yield fund are not indicative of the entire sector, said Gershon Distenfeld, director of high yield at AllianceBernstein. 'They were investing in the distressed part of the market almost exclusively, other high yield funds might invest a little bit in it, but it’s nowhere near 100% of the portfolio,' said Distenfeld. Distenfeld added that Third Avenue also held very concentrated positions which made it hard for the fund manager to sell its positions without taking a major haircut. He said liquidity has been a problem for the high yield market for a long time especially now that Wall Street has been cutting staff on bond trading desks. 'It’s no longer enough to focus on the amount of credit and the amount of duration you have in your fund,' said Distenfeld. 'You have to take liquidity into account.' Distenfeld said he has seen outflows from high yield in the wake of the Third Avenue fund’s closure, but not worse than other periods like the so-called taper tantrum or the European debt crisis.