The news on December 10 that Third Avenue Management had suddenly closed down its Third Avenue Focused Credit Fund (TFCVX), while imposing “gates” to restrict shareholder redemptions, took many advisors by surprise.
Some weren’t aware that the Investment Company Act of 1940 allows mutual funds to indefinitely suspend redemptions – and indeed the law allows this only in emergencies.
The SEC’s own guidance for Investing Wisely in mutual funds states: “Mutual fund investors can readily redeem their shares at the current NAV — plus any fees and charges assessed on redemption — at any time.”
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