Third Avenue Management L.L.C., the money manager founded by value investor Martin Whitman, will reopen its $2.3 billion international fund to investors because the U.S. subprime crisis lowered prices and created buying opportunities.
Third Avenue International Value Fund, managed by Amit Wadhwaney, will begin accepting money from investors Thursday, the New York-based company said last week. Third Avenue closed the mutual fund in July 2005, when a surge of deposits left the manager with 51 percent of assets in cash.
The subprime-mortgage debacle has sent global stocks tumbling on concern economic growth will slow. The Morgan Stanley Capital International EAFE Index of developed markets has fallen 2.4 percent since its Oct. 31 high, and the MSCI Emerging Markets Index has declined 4.9 percent. Wadhwaney has pushed into emerging markets, including Taiwan and Chile.
"The whiff of panic currently blowing through the financial markets has the potential to present tremendous buying opportunities," Wadhwaney said in the statement.
Third Avenue International Value has climbed 5.7 percent this year, trailing 60 percent of rival funds that invest in small and medium-size non-U.S. companies, according to Morningstar Inc., of Chicago. It has advanced an annual average of 24 percent over five years.
The worldwide decline in share prices helped managers reduce the fund's stake in cash to 12 percent as of Aug. 31, according to data compiled by Bloomberg.
The MSCI Emerging Markets Index fell 10 percent from mid-July to mid-September, when mortgage-market woes first began spreading to global stock and bond markets. It later climbed back to a high for the year before selling resumed in November.
Wadhwaney typically buys unpopular stocks and sometimes holds them for years. He's loaded up on shares in Japan, among the world's worst-performing countries. The fund has about 14 percent of assets in Japan, whose Nikkei 225 Stock Average Index has declined 6.6 percent this year. Canadian companies accounted for about 18 percent of assets on July 31, and Europe represented about 15 percent.
"The house style at Third Avenue is safe and cheap, and this fund definitely follows that style," Morningstar analyst Michael Breen said. "The reopening of the fund is a function of Wadhwaney finding new investment opportunities and plays on his stock-picking abilities."
Saskatchewan Wheat Pool Inc., Canada's second-largest grain handler, was the fund's biggest holding as of July 31, according to regulatory filings. Shares of Saskatchewan Wheat Pool have climbed 45 percent this year.
The fund's second-biggest holding, Canada's Catalyst Paper Corp., has slumped 50 percent this year as the papermaker has struggled with losses, in part because of rising commodity prices.
In Japan, Third Avenue International Value owns car-window-maker Nippon Sheet Glass Co. Ltd. The company's stock has climbed 9.3 percent as Nippon Sheet Glass has made acquisitions to increase its business.
The fund has expanded investments in Poland, Thailand and South Korea since 2005, Third Avenue said.
Before joining Third Avenue in 1999, Wadhwaney was fund manager of Carl Marks Global Value Fund L.P., the predecessor to Third Avenue Global Fund, and was a principal of Glenrock Asset Management Associates L.P. in 1995.
Third Avenue was founded in 1986 by Whitman, formerly an investment banker and turnaround specialist for bankrupt companies. Whitman still manages the company's biggest fund, Third Avenue Value Fund, which has $12 billion in assets.
Third Ave. Int'l Value Fund
Up 5.7 percent in 2007.
Saskatchewan Wheat Pool Inc., Catalyst Paper Corp., Nippon Sheet Glass Co.
SOURCE: Bloomberg News