Save Our Swings

How Highland Capital Invests In Alternative Funds

Highland Capital is a Dallas-based company that offers actively managed alternative funds. It was established in 1993 by two businessmen, Mark Okada and James Dondero. It is now one of the largest firms of its type in the world and has almost $16 billion in assets under management. The company is experienced in a variety of alternative investment assets including real estate, natural resources, private equity, and collateralized loan obligations (or CLOs for short). They have a wide variety of clients including public pension funds, endowments, fund of funds, and other financial institutions among others.
One of Highland Capital’s funds that had great success in 2016 was their Highland Small Cap Equity Fund, HSZAX. It returned 31.6% for the year while the S&P 500 returned 12%. What drove its growth for the year was that it invested heavily in pipeline partnerships. The key to this type of investment is that the cash flow from these partnerships are based on the amount of crude going through the pipes, not the value of that crude. They had invested in this when the oil price had hit rock bottom and as it went back up the pipeline partnerships accounted for half the return of HSZAX for the year.
This fund is managed by Dondero as well as Michael Gregory, a Chief Investment Officer at the subsidiary Highland Alternative Investors. Looking with an eye towards 2017, he said that he expects healthcare companies to outperform for the year. He says that he sees companies moving to address the opioid epidemic hurting communities across the United States. They are fast-tracking new drugs that can be more safely prescribed to people who are suffering from pain. They aren’t as addicted as opioids which should help to ease the epidemic.
The management team of Highland Capital also believes in investing in the communities that it is part of. They donate a substantial amount of money to charities in Dallas and other cities, more than $10 million since 2005. Among these are the Santa Barbara Foundation, The Kansas City Foundation, and the Dallas Foundation which all support local nonprofits.

Scroll To Top