There’s nothing like a major market slide—and its attendant collapses—to get the rumor mill turning. Throw in a pair of similarly-named firms, one doing well, one, well, not so much, and you’ve got a problem.
At least you do if your name is Highland Capital Management. The $40 billion Dallas alternatives firm sent a letter to investors yesterday assuring them that it is not the Highland firm reported by the Financial Times to be in serious trouble.
That firm, New York-based Highland Financial Holdings, reportedly saw its Special Opportunities Fund lose 17.5% in June and is expecting to report further losses for July.
“Over the past several seeks, an unaffiliated investment firm and its investment fund whose names include the word ‘Highland,’ have experienced financial difficulties,” the firm wrote in the letter. “We want to clarify that their situations are in no way, shape or form associated with Highland Capital Management, L.P. or the companies we manage, and, in contrast, we believe that our firm, funds and the companies we manage are positioned to perform well in the current volatile markets.”
Not that the confusion was without warrant—the firm manages some $18 billion in collateralized loan obligations—but Highland Capital is apparently on the other side of the sub-prime trade.
“Our firm has historically had minor investment exposure to the sub-prime sector, and since February we have been materially short sub-prime,” the firm wrote in the letter. “This is reflected in the continued strong net performance of our hedge funds.”
The letter details that strong performance: Highland’s Credit Opportunities Fund rose 3.11% in June (11.68% year-to-date), its Credit Strategies Master Fund was up a similar amount. The firm’s CDO Opportunity Fund is up 14.29% year-to-date, while its Crusader Funds fell just 0.32% in June (up 11.29% YTD).
Highland said it is finalizing its July returns, which it said should range from up 4% to down 4% on the month.