From the Management Committee: A Letter to Shareholders
December 23, 2015
Dear Fellow Shareholders,
On December 10, 2015 our firm announced a plan to liquidate our Credit Fund. We made this decision with the appropriate gravity and for the singular purpose of protecting our Credit Fund’s shareholders. In spite of the reputational risk that this choice posed for our firm, we believe that any alternative course of action would have represented an abrogation of our duty to our investors. The SEC has also granted an exemptive relief order, which increases transparency during the process and provides us with additional time to formulate an outcome that best meets the needs of shareholders in our Credit Fund.*
Further, on December 14, 2015 Third Avenue’s Management Committee assumed full responsibility for leadership of the firm. The Management Committee has been in place since 2002 when Affiliated Managers Group (“AMG”) invested in Third Avenue and includes David L. Resnick, President and Chief Investment Officer, Vincent J. Dugan, Chief Financial Officer and Chief Operating Officer, W. James Hall, General Counsel and Secretary, and Jason Wolf and Matthew Fine, Portfolio Managers. On average, we have provided a decade of service to the firm and work well together. This management structure is common in boutique asset managers, well suited for our firm, and ensures that its leadership team is represented by senior members of each of our functional departments.
While Third Avenue has some challenges ahead, we strongly believe that we have done what is in the best interest of our Funds’ shareholders and we remain extremely optimistic about the future. We note the following facts:
- Third Avenue is in a strong financial position and will remain so. We have the capability to retain and incentivize talented employees who will ultimately drive Third Avenue’s success. The core investment team has not changed, and all Lead Portfolio Managers remain partners of the firm. Third Avenue continues to be an independent firm with operational and investment autonomy preserved through AMG’s partnership approach. AMG steadfastly supports Third Avenue in its business decisions.
- The vast majority of our firm’s assets under management are in asset classes other than credit: Value, Small Cap, Real Estate and International. These strategies are composed almost entirely of publicly traded equities listed on major global exchanges, and therefore have a completely different liquidity profile from our Credit Fund. Aside from a single small position, there is no overlap between Third Avenue’s equity strategies and our Credit Fund.
- Our commitment to the differentiated deep-value investment approach, developed by Marty Whitman, will continue to define us as investors. We believe active deep-value investing has a vital role to play in generating attractive returns over the long term. While some of our Funds have produced very impressive track records, others have underperformed benchmarks over recent periods. We would remind investors that we have been in this position before (the late 1990s for example) only to produce subsequent stretches of outstanding performance. A truly differentiated approach will at times underperform but that does not diminish its relevance. History suggests this could prove the wrong time to sell value investments.
These past few weeks have been challenging, but the decisions we made were necessary to protect those who we come to work for everyday: our clients. We look forward to continuing to serve you. Please do not hesitate to contact us if you have further questions. In the meantime we wish you a happy, healthy and prosperous New Year.
Sincerely,
Third Avenue Management LLC
David L. Resnick
President, Chief Investment Officer
Vincent J. Dugan, CPA
Chief Financial Officer & Chief Operating Officer
W. James Hall
General Counsel and Secretary
Jason Wolf, CFA
Lead Portfolio Manager
Matthew Fine, CFA
Lead Portfolio Manager
* Please see our letter dated December 16, 2015 for more information.