The Watchman On The Wall

The Watchman On The Wall
Eph 6:12 For we wrestle not against flesh and blood, but against principalities, against powers, against the rulers of the darkness of this world, against spiritual wickedness in high places. Verse 13 Wherefore take unto you the whole armour of God, that ye may be able to withstand in the evil day, and having done all, to stand.

Tuesday, December 15, 2015

How Is Your Mutual Fund Performing?

Third Avenue vs. Credit Suisse

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.
List of mutual funds

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