Third Avenue, Stone Lion Capital Spark Memories of ’08: Analysis

The events of recent days surrounding the redemption freeze from Third Avenue’s Focused Credit Fund and Stone Lion Capital’s suspension of redemptions from its $400 million credit hedge fund, both just days before the U.S. Federal Reserve may raise interest rates for the first time in almost a decade, could create a perfect storm for risk assets over year-end, Bloomberg strategist Simon Ballard writes.

Restricting high-yield exchange traded fund (ETF) redemptions, in order to stem recent investor outflows could be likened to BNP Paribas and Bear Stearns freezing redemptions on their respective credit hedge funds back in 2008. These moves by BNP and Bear Stearns at the time were subsequently seen by many as having marked the beginning of the Global Financial Crisis, after it led to paralysis of money markets and triggered widespread risk aversion.