Pioneer Investment Management of Boston has purchased the tiny $8.8 million Third Avenue High Yield Fund from EQSF Advisers, the New York-based adviser to the five fund Third Avenue Trust fund complex, for an undisclosed amount. As part of the arrangement, Margaret Patel, the fund's current portfolio manager, will continue to manage the fund. Pending approval of Third Avenue High Yield fund shareholders, the fund will become the Pioneer High Yield Fund.

Pioneer chose to buy high yield bond fund capability rather than building its own because of the fund's solid track record, said Sherman Russ, senior vice president and co-head of Pioneer's income team.

"It's a little bit of a kick start; an interesting way to get us into the (high yield) business," he said.

A further advantage is that there will be no need to argue over who owns the right to boast of the fund's performance, Patel said.

Pioneer originally sought to simply lure portfolio manager Patel away from the nearly two-year-old Third Avenue High Yield Fund, said Russ. But after Patel agreed to move to Pioneer, Pioneer approached Marty Whitman, chairman and CEO of EQSF, about a possible sale of the fund.

"We hired her even before we knew the fund was for sale," said Russ. EQSF agreed to sell the fund to Pioneer and Patel.

Representatives of EQSF declined to comment on the sale.

The purchase broadens Pioneer's fixed-income fund offerings. Moreover, it gives Pioneer a much desired toe hold in the high yield bond fund sector.

"It is my desire to expand the product line to move into below investment grade securities," said Russ. Russ, who has been with Pioneer since 1983, says he initiated the firm's move to invest in high yield securities.

In the early 1990s, Pioneer, a company known for investing conservatively, first allowed below investment-grade securities in its closed-end Pioneer Interest Shares, a fund formerly owned and advised by Mutual of Omaha, said Russ. Since then, Pioneer has tentatively allowed managers to invest in the junk bond market for its open-end funds. The fledgling Pioneer Strategic Income Fund, with $11 million in assets, is allowed to invest in both foreign and domestic high yield securities. Other Pioneer bond funds are expected to be allowed to do the same.

Until recently, Pioneer, with a combined $24 billion under management among its U.S. and offshore mutual funds and institutional client accounts, has been an equity-oriented fund group. It has 13 U.S. and international equity funds. However, Pioneer offers only six fixed-income funds. Those include the Pioneer Strategic Income Fund which was introduced in April. It is managed by Kenneth Taubes. Taubes formerly ran the Putnam Diversified Income Fund. Pioneer also manages two balanced funds and a money fund.

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