Osprey Associates Reports Bond Fund Closure Augurs New Credit Crunch

Posted December 17, 2015 by ospreyassociates

Osprey Associates: The closure of a mutual fund investing in high-yield or ‘junk’ bonds is largest since the financial crisis.

Tokyo, Japan-headquartered securities broker, Osprey Associates has warned investors that the closure of a $760 million mutual fund that invested in high-yield debt could be the first ‘canary-in-the-coalmine’ to usher in a new credit crunch8 years after the one which preceded the great financial crisis of 2008.

Respected fund manager, Third Avenue Management shuttered its Focused Credit Fund after a slew of redemptions by worried investors meant that further withdrawals would have forced it to sell assets at prices that would have “unfairly disadvantaged the remaining shareholders”.

James Conroy, chief economist at Osprey Associates said, “Right now, this seems to be an isolated incident but stresses in the high-yield bond market have been apparent for some time now.”

High-yield or “junk” bonds became highly popular with institutional investors searching for yield in a market where interest rates were at near-zero. Many junk bonds were issued by energy companies to fund the shale oil boom but the collapse in oil prices since 2014 has decimated their ability to meet their servicing obligations leading many to simply file for bankruptcy.

“The failures will only get worse now that oil in trading as below $35. Billions of dollars’ worth of these bonds are on the balance sheets of institutional investors like pension funds an insurers but they are not as widely-owned as subprime debt was so, hopefully, they pose no systemic. That said, everyone thought subprime was contained and look at the way that ended,” said Conroy.

Osprey Associates warns that should it become apparent that the problem is far more widespread, a new credit crunch could ensue.

About Osprey Associates:
We at Osprey Associates offer ourselves as a guide through an increasingly complex financial marketplace to thousands of investors both large and small and, with some $3.3 billion-worth of assets under our diligent stewardship as at March 1st 2014, we consider ourselves to be one of the premier wealth and investment management practices in Asia.

It is our sincere hope that your visit to our website provides you with valuable and easy-to-understand insight into the world of wealth and investment management.
-- END ---
Share Facebook Twitter
Print Friendly and PDF DisclaimerReport Abuse
Contact Email [email protected]
Issued By Charles Winter
Website http://www.ospreyassociates.com
Phone +81345704348
Business Address Toranomon Kotohira Tower, Level12, 1-2-8 Toranomon,
Minato-ku, Tokyo, Tokyo-to, Japan
Country Japan
Categories Business , Finance , Industry
Tags investors , pension funds , Bonds , Osprey Associates
Last Updated December 17, 2015