More Trouble For Funds That Start With "High"


Another day, another slew of reader tips about tanking hedge funds. We are told that one of the big winners is Highland Financial Holdings, a NY-based firm founded in 1998 heavily invested in MBS that prides itself on its commitment to risk management, so much so that it's constantly flashing its 2004 Hedge Fund Manager of the Year award from Risk Magazine on its website.
Highland is so committed to "risk management and transparency," that its Highland Special Opportunity fund is transparently closing down and is now worth 2 cents on the dollar after a fire sale of securities at distressed prices. Another fund of the company, Highland Spectrum is rumored to be down 50% for the month of July. One of the biggest losers is JPMorgan, which we are told has a $75 million investment in Highland.
Highland's "Investment Philosophy," from its website:

HFH Group has created a highly disciplined value oriented approach to security selection. Our approach is either top-down (sector level) or bottom-up (loan level) depending upon the credit quality and/or type of security we are trading. Each approach seeks to exploit security mispricings we observe in many MBS and ABS. The foundation of our investment philosophy is rooted in the knowledge that the short end of the yield curve offers a superior risk-adjusted opportunity set for generating consistent returns.

Other gems in the "Risk Management" section:

Risk management is an integral part of HFH’s culture and is viewed as one of our most important jobs... HFH’s risk management approach emphasizes prudent portfolio diversification, asset and liability rotation and continual rigorous analytical review. Taken together, these strategies have resulted in both low volatility and consistent capital preservation... HFH was awarded Hedge Fund Manager of the Year in 2004 by Risk Magazine for our commitment to risk management and transparency.

Highland Financial Holdings