On Wednesday, the Third Avenue Focused Credit Fund sent a letter to shareholders announcing that it was liquidating and had “gated” investors due to its “illiquid” portfolio. Third Avenue’s focus was on high-yield – junk – credit. In this context, “gating” means suspension of redemptions while the fund attempts to obtain better prices for its portfolio by selling it off slowly.

There’s never just one cockroach, so late yesterday Dow Jones reported that the $1.3 billion Manhattan-based Stone Lion Capital, a distress-focused hedge fund, has just suspended redemptions after “substantial requests.”

Junk investors are getting the message – run and hide, the game is on. The next Fed-generated financial crisis is getting underway.


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