Paying the Price for Liquidity

The announcement last week that Third Avenue Management would liquidate its Third Avenue Focused Credit Fund sent tremors throughout the high-yield market, which was having plenty of problems already.

Shutting down a fund—which isn’t as rare as you might think—usually takes place because a fund hasn’t gathered sufficient assets to make running it worthwhile for the management company. Almost 2,400 funds were shut between 1999 and 2011, according to a study by Morningstar, and closures continue.