Highland Capital Management launches dedicated CLO UCITS fund
Highland Capital Management has launched the Highland Flexible Income UCITS Fund, an Irish-domiciled fund focused on collateralised loan obligation (CLO) debt.
An innovator in the structured credit space, Highland enhances its suite of alternative credit offerings with the new fund, extending the firm's reach among European investors.
"Improving and expanding access to the floating-rate debt market is in Highland's DNA, and this fund is the latest manifestation of that," says Mark Okada, Highland Capital Management co-founder and co-chief investment officer (CIO). "The UCITS framework provides a number of advantages for investors, and with Highland's structured credit expertise and experience managing loan and CLO portfolios in liquidity-driven vehicles, we are uniquely qualified to execute this strategy."
Overseen by Okada, along with Highland partner and co-CIO Trey Parker (pictured), and Neil Desai, managing director and structured products portfolio manager, the fund provides targeted access to floating-rate debt through CLO tranches. Highland developed the product to meet the growing demand for floating-rate strategies among European investors. Such strategies are relatively uncommon within the broader UCITS fixed-income universe, forcing investors into more duration-sensitive strategies for income generation. The fund, which aims to generate high current income with the potential for incremental return through capital appreciation, thus provides a valuable option for income-seeking investors at a time when interest-rate risk is a growing concern.
CLO debt base rates reset quarterly, limiting rate-risk exposure. Additionally, CLOs offer yields that often exceed similarly rated credit instruments, due in part to the relative complexity. The durable yield provided by the CLO structure is a draw for investors looking for stable income without sacrificing credit quality.
The fund invests in US and European structured products through a combination of fundamental security analysis and dynamic allocation across ratings categories. The portfolio primarily consists of high quality, resilient investment-grade CLO debt, focusing on minimising credit risk – a key consideration at this point in the credit cycle.
The Highland Flexible Income UCITS Fund is hosted on the Montlake UCITS Platform, a leading independent platform for UCITS funds that provides investors with access to a range of liquid, transparent, and regulated investment products domiciled in Dublin.
Highland has appointed Bury Street Capital, a London-based institutional capital-raising firm, to represent it in the UK, continental Europe, and the Middle East. In this context, Bury Street will act as the distributor of the UCITS fund.
Highland manages secondary CLO investments in a number of other vehicles, including mutual funds, private funds, and separate accounts.