Highland Capital Blunders into Wall Street’s Crosshairs
On Wall Street, what goes around, comes around.
Highland Capital liked to dish it out, but can they take it?
Animal trophies cover the walls of the Dallas headquarters of Highland Capital Management, according to people who have been there. Some, it is said, came from beasts bagged on safari in Africa by Jim Dondero, who founded the firm with Mark Okada in 1993 – while others were shot from Mr Dondero’s back porch in Texas.
The symbolism is fitting. When the global financial turmoil began last year, Highland was one of the more feared big-game hunters in the credit markets. It was a leader of a new breed of alternative hedge funds that invested in high-yield loans to junk-rated corporate borrowers and helped fuel a leveraged buy-out boom in the process.
With the leveraged loans market now in free fall, however, Highland’s large holdings of such debt have transformed it from predator to potential target. Its main funds fell sharply in value during January and, although its results in February are not known, its executives have been forced to take an unusually defensive posture – meeting investors to discourage redemptions, paring back the use of borrowed money to amplify bets and hedging its positions. FT
Long-term relationships are rarer than a green ticker on Wall Street these days, and Highland’s prior behavior is coming back to haunt them. But they are unique-it is the only shop I know of on Wall Street to employ a time clock:
Highland was so demanding it required its analysts to punch a time clock and put in a minimum of 60 hours a week at the office.
It would appear Wall Street’s sweatshop is sweating bullets.
Hunter among hedge funds is now the hunted
FT
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