Last week, Third Avenue Focused Credit Fund suspended
investor redemptions, and credit markets reacted violently. This was the first
time mutual fund investors were similarly gated since the financial crisis of
2008. However, the $788.5 million Third Avenue fund might be the tip of the
iceberg.
According to data obtained by Yahoo
Finance*, there are currently $27.2 billion in mutual fund assets that have
suffered peak-to-valley losses over the last year greater than 10%. This amount
is 35 times greater than the size of the Third Avenue fund, which suffered the
third worse loss in the list of -34.5%.
The two greatest losses bear a common
name, which dominates the list: Credit Suisse. Total assets of $15.9 billion are represented by
Credit Suisse named funds, or 59% of the $27.2 billion total.
The largest fund in the list is Credit Suisse Institutional
International, which has total assets of $9.9 billion. According to
Morningstar, it is currently managed by American Funds.
When the time period of the analysis
is extended to the peak of June 19, 2014, fund performance for the Credit
Suisse named fund reflects a loss of -24.6%, which is roughly half of the
-47.4% loss of the Third Avenue fund.
Today, the Federal Open Market
Committee commences a two day meeting and is widely expected to announce on
Wednesday an interest rate increase of 25 basis points for its benchmark
Federal Funds rate. Further
rate hikes may exacerbate problems in the credit markets, as companies that
rely on high yield financing would face difficulty obtaining new loans and
rolling over existing loans. Nevertheless, according to a Goldman Sachs
reported dated December 11, the credit markets are simply sending a "false
recession signal."
* Note regarding data collection: for
mutual fund families that contain multiple funds that trade under different
tickers, only one fund name is represented. However total assets are reported
for the entire family of funds. It is also possible that fund names do not
necessarily imply current sponsorship or management, and may simply reflect
historical sponsorship or management.
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