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Whitman to Step Down at Third Avenue Value

Current comanager Ian Lapey will take the reins. 

Bridget B. Hughes, CFA, 02/09/2012

After launching Third Avenue Value TAVFX more than 20 years ago and serving as its portfolio manager since then, Marty Whitman will step down from the fund on March 1, 2012. Whitman's comanager since mid-2009 and named successor since 2006, Ian Lapey, will serve as the fund's sole manager.

Whitman, 87, will remain at Third Avenue researching stocks, bonds, and other investments and working with the fund family's analysts. He'll also run a new private concentrated value fund for accredited investors. Whitman will invest a portion but not all of his direct holdings in Third Avenue Value in this new offering. Those investments will be redeemed in kind; there will thus not be any undue tax burden on existing shareholders as a result. Even after these transactions, Whitman will remain a large shareholder in the fund.

Shareholders should not fret about Whitman's departure. Although his experience, wisdom, and conviction will be missed, Lapey is ready to take the reins after spending nearly six years under Whitman's wing. Lapey also made his mark on the Value portfolio through a number of specific stock and bond investments, and it's encouraging that Whitman remains a part of the collaborative research team. While Third Avenue recently added comanagers to two of its other funds, the firm will not name another comanager to Third Avenue Value at this time.

Morningstar will retain its Silver rating on the fund. The fund has struggled over the past five years; its 3.76% annualized loss through Feb. 8, 2012, ranks in the world-stock category's worst quartile, and volatility has been high. However, the fund's distinctive investment approach, research backbone, and still strong long-term record, as well as Whitman's mentorship of Lapey, argue in its favor.

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Bridget B. Hughes, CFA, is an associate director of fund analysis with Morningstar and is also happy to chat with you.
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