Highland Long/Short Equity Fund

C000033776 Fund Overview

Highland Long/Short Equity Fund is a US mutual fund managed by Nexpoint Funds I, categorised as Money Market. ABC INVEST provides holdings, performance, costs, cashflows, risk data, prospectus documents and SEC filings, sourced from SEC filings.

• Type: US mutual fund
• Manager: Nexpoint Funds I
• Category: Money Market
• Assets under management: $52.24M
• SEC CIK: 0001354917
• SEC series ID: S000012407
• Share class ID: C000033776

C000033776 Investment Objective and Strategy

Highland Long/Short Equity Fund describes its objective and strategy as follows, from its latest prospectus filed with the SEC by Nexpoint Funds I.

Investment objective

The investment objective of Highland Long/Short Equity Fund (“Highland Long/Short Equity Fund” or the “Fund”) is to seek consistent, above-average total returns primarily through capital appreciation, while also attempting to preserve capital and mitigate risk through hedging activities.

Principal investment strategy

The Fund seeks to achieve its investment objective by investing at least 80% of the value of its total assets (net assets plus the amount of any borrowings for investment purposes) under normal circumstances in equity securities. Equity securities of U.S. or non-U.S. issuers in which the Fund may invest include common stocks, preferred stocks, convertible securities, depositary receipts, warrants to buy common stocks and derivatives on any of the foregoing securities. The Fund may invest in equity securities of issuers of any market capitalization and the Fund may invest in securities issued by other investment companies, including exchange-traded funds (ETFs). The Fund will generally take long and short positions in equity securities and the Adviser will vary the Funds long-short exposure over time based on its assessment of market conditions and other factors.

This is not a market-neutral strategy. In addition, the Fund may invest up to 20% of the value of its assets in a wide variety of other U.S. and non-U.S. non-equity securities and financial instruments, including but not limited to bonds and other debt securities, money market instruments, illiquid securities, cash and cash equivalents. The Fund may invest up to 50% of the value of its total assets in securities of non-U.S. issuers, including emerging market issuers. Such securities may be denominated in U.S. dollars, non-U.S. currencies or multinational currency units. The reference in the Funds investment objective to capital preservation does not indicate that the Fund may not lose money. The Adviser seeks to employ strategies that are consistent with capital preservation, but there can be no assurance that the Adviser will be successful in doing so.

The Fund may invest without limitation in warrants and may also use derivatives, primarily swaps (including equity, variance and volatility swaps), options and futures contracts on securities, interest rates, non-physical commodities and/or currencies, as substitutes for direct investments the Fund can make. The Fund may also use derivatives such as swaps, options (including options on futures), futures, and foreign currency transactions (e.g., foreign currency swaps, futures and forwards) to any extent deemed by the Adviser to be in the best interest of the Fund, and to the extent permitted by the Investment Company Act of 1940, as amended (the 1940 Act), to hedge various investments for risk management and speculative purposes. The Fund may borrow an amount up to 33 1/3% (or such other percentage permitted by law) of its total assets (including the amount borrowed) less all liabilities other than borrowings.

The Fund may borrow for investment purposes, to meet redemption requests and for temporary, extraordinary or emergency purposes. The use of borrowing for investment purposes (i.e., leverage) increases both investment opportunity and investment risk. In addition, the Fund may seek additional income by making secured loans of its portfolio securities. The Funds investment strategy utilizes a variety of methods to evaluate long and short equity investments of various market capitalizations to find securities that the Adviser believes offer the potential for capital gains. As part of this strategy, the Adviser seeks to invest in industries, sectors and securities that it believes are more attractive on either a relative basis or on an absolute basis. In addition to purchasing, or taking long positions in equity securities, the Funds investment strategy includes short selling, and may include investments in derivatives, ETFs, and/or fixed income securities.

In selecting investments for long positions of the Fund, the Adviser focuses on issuers that it believes: (i) have strong, free cash flow and pay regular dividends; (ii) have potential for long-term earnings per share growth; (iii) may be subject to a value catalyst, such as industry developments, regulatory changes, changes in management, sale or spinoff of a division or the development of a profitable new business; (iv) are well-managed; and (v) will benefit from sustainable long-term economic dynamics, such as globalization of an issuers industry or an issuers increased focus on productivity or enhancement of services. The Adviser seeks to invest in the common equity of companies that the Adviser believes are trading below their intrinsic value. To do so, the Adviser will typically perform fundamental investment analysis, which may involve comparing the value of the companys common equity to that of its: (a) historical and/or expected cash flows; (b) historical and/or expected growth rates; (c) historical and/or expected strategic positioning; and (d) historical and/or current valuation on an absolute basis or relative to its industry, the overall market and/or historical valuation levels.

The Adviser may purchase securities of a company that the Adviser believes: (i) is undervalued relative to normalized business and industry fundamentals or to the expected growth that the Adviser believes the company will achieve; (ii) has assets not fully valued by the marketplace; (iii) is experiencing strong underlying secular growth trends or strong visibility into growth prospects; (iv) has earnings estimates that the Adviser believes are too low or has the potential for long-term earnings growth; (v) has strong competitive barriers to entry; (vi) is experiencing strong business fundamentals; (vii) has a strong management team; (viii) will see increased multiple expansion or will benefit from sustainable economic dynamics; and/or (ix) may be subject to an identifiable catalyst that the Adviser believes will unlock value.

The Adviser will typically focus on companies that are exhibiting one or more of these indicators. Technical analysis may also be used to help in the decision making process. The Adviser may sell short securities of a company that the Adviser believes: (i) is overvalued relative to normalized business and industry fundamentals or to the expected growth that the Adviser believes the company will achieve; (ii) has a faulty business model; (iii) engages in questionable accounting practices; (iv) shows declining cash flow and/or liquidity; (v) has earnings estimates that the Adviser believes are too high; (vi) has weak competitive barriers to entry; (vii) suffers from deteriorating industry and/or business fundamentals; (viii) has a weak management team; (ix) will see multiple contraction; (x) is not adapting to changes in technological, regulatory or competitive environments; or (xi) provides a hedge against the Funds long exposure, such as a broad based market ETF.

Technical analysis may be used to help in the decision making process. The Adviser generates investment ideas from a variety of different sources. These include, but are not limited to, screening software using both fundamental and technical factors, industry and company contacts, consultants, company press releases, company conference calls, buy-side contacts, sell-side contacts, brokers, third-party research, independent research of financial and corporate information, and news services. The Adviser will make investment decisions based on its analysis of a securitys value, and will also take into account its view of macroeconomic conditions and industry trends. The Adviser will make investments without regard to a companys level of capitalization or the expected tax consequences of the investment (short or long term capital gains).

Once an investment opportunity is determined to be attractive as a stand-alone investment, the Adviser will evaluate the effect of adding that investment to the Funds portfolio. In doing so, the Adviser will seek to minimize the market-related portfolio volatility as well as the risk of a capital loss by hedging such risks primarily by short selling, and, to a lesser extent, through the use of derivatives. The Fund is a non-diversified fund as defined in the 1940 Act but it intends to adhere to the diversification requirements applicable to regulated investment companies (RICs) under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). The Fund is not intended to be a complete investment program. The Adviser expects that the Funds active or frequent trading of portfolio securities will result in a portfolio turnover rate in excess of 100% on an annual basis.

As a result, the Fund may be more likely to realize capital gains, including short-term capital gains taxable as ordinary income, that must be distributed to shareholders as taxable income. High turnover may also cause the Fund to pay more brokerage commissions and to incur other transaction costs, which may detract from performance. The Funds portfolio turnover rate and the amount of brokerage commissions and transaction costs it incurs will vary over time based on market conditions.

C000033776 Costs and Fees

C000033776 costs about $312 per $10,000 invested per year in fund expenses.

• Net expense ratio: 3.12%
• Gross expense ratio: 4.37%
• Portfolio turnover: 252%
• Brokerage commissions: 50.43 bps of average net assets (SEC N-CEN)

C000033776 Cashflows

Over the 12 months to 2020-03, Highland Long/Short Equity Fund had net inflows of $111.93M, from monthly SEC N-PORT filings.

C000033776 Debt Constituents

No individual debt constituents are reported in Highland Long/Short Equity Fund's latest SEC N-PORT filing.

C000033776 Prospectus and SEC Filings

Official Highland Long/Short Equity Fund filings on SEC EDGAR — prospectus, portfolio holdings and annual reports.

• Prospectus (485BPOS) — filed 2019-11-21
• Prospectus (485BPOS) — filed 2018-11-20
• Prospectus supplement (497) — filed 2020-04-23
• Portfolio holdings (N-PORT) — filed 2020-06-01
• Portfolio holdings (N-PORT) — filed 2020-02-28
• Portfolio holdings (N-PORT) — filed 2019-11-27
• Annual census (N-CEN) — filed 2019-09-13
• Annual census, amended (N-CEN/A) — filed 2019-02-25

Related Funds

Other Money Market funds tracked on ABC INVEST:

• Emerald Growth Fund (HSPCX)
• Barings Active Short Duration Bond Fund (BXDIX)
• IVA Worldwide Fund (IVWAX)
• Stadion Tactical Growth Fund (ETFDX)
• BBH Partner Fund - Select Short Term Assets (BBSTX)

Data Sources

ABC INVEST compiles this page from public filings made to the U.S. Securities and Exchange Commission (SEC) through EDGAR: portfolio holdings and monthly cashflows from Form N-PORT, expenses and returns from fund prospectuses (Form 485BPOS) and the SEC DERA Risk/Return Summary data sets, annual data from Form N-CEN, and shareholder reports from Form N-CSR.