High-Yield Bond Funds Said to Face SEC Scrutiny on Liquidity
- Agency examiners sent letters after Third Avenue fund bust
- SEC asked funds about value of holdings and methodologies
U.S. market regulators ordered high-yield credit managers to turn over information showing why their bonds could be sold as quickly as they say following the collapse of a Third Avenue Management LLC fund.
Securities and Exchange Commission examiners sent letters last month to funds that invest in similar securities to the Third Avenue Focused Credit Fund, which had the bulk of its assets in distressed debt and bank loans, according to a person familiar with the matter. The $788.5 million fund blocked client withdrawals to avoid dumping bonds at fire-sale prices. The regulator appeared to be trying to gauge whether other funds could face the same fate as Third Avenue’s fund, said the person, who asked not be named because examination letters are private.