The fund has declined 12 percent this year, lagging behind 99 percent of peers, according to data compiled by Bloomberg.
The $246.3 million Toews Hedged High Yield Bond Fund completed its exit from junk bonds and moved into all cash on Nov. 12, according to Eben Burr, a sales and marketing director at the Linwood, New Jersey-based firm. The fund has returned 0.4 percent this year.
Federated Investors Inc.’s Mark Durbiano, who runs high- yield investing, said Third Avenue’s credit strategies resembled some hedge funds rather than the typical junk-bond fund.
‘Selection, Diligence’
Federated’s high-yield funds invest in companies in such industries as health care and packaging that are able to carry high debt levels because they generate stable, predictable free cash flow, Durbiano said.
“We think security selection, diligence and focusing on a company’s ability to pay debt, as opposed to their gross leverage level, is the way to succeed in the high-yield market,” he said.
The firm’s high-yield funds are overweight in CCC rated debt, which hasn’t changed in recent days, he said. Its largest junk-bond fund, the $4.3 billion Federated Institutional High Yield Bond Fund, has declined 4 percent this year, beating 70 percent of its peers, according to data compiled by Bloomberg.