Investors filed a lawsuit in Delaware Chancery Court against Highland Capital Management, accusing the firm of gross negligence and willful misconduct in its management of the Highland Crusader Fund, according to a Wall Street Journal report. That fund was once the firm’s flagship but was shuttered in 2008 as the value of its assets plunged at the same time that investors stampeded for the exits at the height of the global financial crisis.
The lawsuit, filed July 5, alleges that Highland, founded by James Dondero, has delayed redeeming the funds remaining assets while paying itself millions of dollars. Highland said in a statement that it “acted appropriately at all times and...intends to vigorously dispute the allegations,” according to the report. Investors in the fund, which managed $3 billion at its peak, agreed to a distribution plan back in 2011 in which Highland pledged to sell all the fund’s assets within three-and-a-half years. But the fund still has assets that have not been sold, and investors learned of the alleged misconduct in April, prompting their decision to file the suit, according to the report, citing redacted court documents. Highland says it has not sold off the assets in the original time frame because of a court-imposed delay, the report said.
Highland manages structured credit funds, hedge funds, collateralized loan obligations, mutual funds and ETFs, among other strategies. It manages about $18 billion in total assets, according to its website.
___
Score one for funds of funds. The world’s third-largest pension fund has selected two firms to manage a portion of its assets in funds of funds, according to a Reuters report. South Korea’s $415 billion National Pension Service will invest up to $500 million each to BlackRock’s BlackRock Financial Management arm and Chicago-based Grosvenor Capital Management in an effort to diversify the fund’s risk, Reuters reported.
___
Brexit may have divided voters, but managers of commodity trading advisors undoubtedly got a boost from the U.K.'s historic vote to leave the European Union — and it’s apparently the gift that keeps on giving, according to Lyxor Asset Management’s latest weekly hedge fund report. Though global equity markets plunged in the days after the decision, the decline was short-lived, with the MSCI world index back near year-to-date highs and credit spreads narrowing in the U.S., Europe and emerging markets.
CTAs, which outperformed in the wake of Brexit, have kept up their gains, with the Lyxor Broad CTA Index adding 2.2 percent for the first week of July, following big gains of 4.2 percent for the last week of June, according to the report. It’s now up 4.3 percent for the year, making it the best-performing of all hedge fund strategies Lyxor tracks. CTAs got a big boost from their fixed income positions, as sovereign bond yeilds kept falling, while short bets against the pound and investments in equities and commodities added to the gains, Lyxor said.
All other hedge fund strategies posted positive returns last week, with the Lyxor Hedge Fund index gaining 0.6 percent early in the third quarter. It’s still off by 3 percent year-to-date, however. Lyxor notes that hedge funds have slashed their equity beta positions following Brexit, a move it calls “reassuring.” Lyxor adds that it favors strategies with limited exposure to the markets, including market neutral equity, fixed income arbitrage, merger arbitrange and of course CTAs.
___
Color me shocked. A new survey from industry trade group the New York Hedge Fund Roundtable finds that its members think that women in the alterative investment industry — and Wall Street at large — face much tougher obstacles than men when it comes to achieving success. Chief among them: pervasive discrimination against women in the finance industry. Some 80 percent of survey respondents said they think few women are even given a chance to prove themselves in the industry because of deeply rooted belief among upper management that women will ultimately abandon their careers to take care of their families. A mere 20 percent said they think efforts by Wall Street to stamp out sexism have been successful and that women are closer to being on equal footing with men than they used to be.
As for why there are so few women compared with men pursuing careers in finance, some 36 percent said many women are still turned off by the industry’s dominance by men, while 21 said there are fewer qualified women than men looking to enter the industry.
More than half the survey’s respondents (54 percent) think sexism on Wall Street is as prevalent as ever (though less overt), although 46 percent said it is significantly less prevalent, thanks to concerted efforts by Wall Street firms to address the problem. As for the pay gap, 59 percent of survey respondents said that the reason women make so much less than their male counterparts for specific jobs is because of preconceived notions that men are superior to women in finance, while 41 percent think it’s because women are less comfortable asking for money than their male colleagues and don’t push for higher salaries that are appropriate for their jobs.
“While there have been some definite inroads made in the way that women on Wall Street and in the alternative investment community are treated and the opportunities afforded them, there remains a conscious belief that there is still room for improvement,” said Timothy Selby, president of the New York Hedge Fund Roundtable and a partner at law firm Alston & Bird. “Openly discussing issues like this will hopefully contribute to a desired atmosphere of equality where no one feels unfairly treated based on gender or other nonsubstantive differences.”
Of the survey’s roughly 140 respondents, 41 percent were service providers, 29 percent were fund managers, 10 percent were allocators, 10 percent were risk management or trading and 10 percent held other roles in the industry.
___
Speaking of surveys, Northern Trust Corp. polled approximately 50 Nordic institutional investors on their investment plans and found that more than 80 percent plan to increase their allocations to alternative investments in the next five years. Hedge funds are not at the top of their list, however; the survey found that these investors plan to allocate the most to private equity and infrastructure investments over the period.
The investors, citing the current low-growth and low-interest-rate environment, said they also plan to pay more attention to so-called ESG (environmental, social and governance) factors when making investments. Northern Trust had $451 billion of alternative assets under administration for asset managers and $531 billion in alternative assets under administration on behalf of institutional investors.
___
Tiger Cub Philippe Laffont’s Coatue Management acquired 625,000 shares, or 6.25 percent, of Twilio, which makes cloud computing software. The purchase was disclosed in a 13G filing with the Securities and Exchange Commission, indicating it is a passive investment.
___
Jeffrey Ubben’s ValueAct Capital Management said in a 13D filing that it has taken a 6.8 percent stake, amounting to four million shares, of Alliance Data Systems and plans to discuss with management ways to increase shareholder value. The company provides marketing and loyalty services to its customers. Shares rose 4.69 percent on the news, to close at $210.39.
