Highland CDO Fund Leaves Investors With Nothing

Feb 23 2009 | 12:37am ET

Highland Capital Management is closing its third hedge fund in less than five months, with investors in a collateralized debt obligation vehicle losing everything.

Dallas-based Highland told investors in its CDO Opportunity Fund earlier this month that what’s left of the fund’s assets would go to creditors. Clients in the fund, which managed some $361.6 million before the start of the credit crisis, will get nothing.

“We are extremely disappointed in the funds’ performance and this outcome, but believe there is no viable path to any recovery for investors,” Highland wrote in a Feb. 4 letter to investors, according to Bloomberg News. The fund’s liabilities exceed its assets “to such a degree” that there will be nothing left. The firm blamed “the unprecedented market volatility and disruption to the financial system, and the market for structured products assets in particular.”

“It is in the best interests” of the fund to shut down, the letter said. Highland itself was the fund’s largest shareholder.


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