James Dondero and Collateralized Loan Obligations
James Dondero and Mark Okada helped pioneer the use of Collateralized Loan Obligations (CLO) while creating Highland Capital Management with Mark Okada in 1993. CLOs are a diversified pool of broadly syndicated, senior secured, corporate bank loans typically financed through the issuance of AAA to BB rated debt and an equity tranche.
Highland executes its CLO management business through its affiliate specialized in structured credit, ACIS Capital Management. Jim Dondero’s Highland Capital Management, together with its affiliates, is the largest US CLO manager by AUM, and has structured and monitored 39 CLOs/CDOs with over $31 billion in total assets.(1)
James Dondero’s CLO theses utilizes a continuous risk management process with active top-down portfolio rebalancing. Acis CLO Insight™ integrates thorough credit analysis with underlying credits under review for quick and accurate fundamental analysis. Jim Dondero works with the CLO team to conduct a detailed investment process which includes analysis, benchmarking, documentation review, liquidity analysis and formalized fundamental analysis. Optimized trading execution and sourcing new CLO ideas are also utilized to create additional alpha.
- Source – Moody’s CLO Interest News Letter, June 2014
About Highland Capital Management, L.P.
Highland Capital Management, L.P. is an SEC-registered investment adviser which, together with our affiliates, has approximately $18 billion of assets under management. Founded in 1993 by James Dondero and Mark Okada, Highland is one of the largest and most experienced global alternative credit managers. Highland specializes in credit strategies, such as credit hedge funds, long only funds and separate accounts, distressed and special situation private equity, and collateralized loan obligations (CLOs). Highland also offers alternative investments, including emerging markets, long/short equities, and natural resources. Highland’s diversified client base includes public pension plans, foundations, endowments, corporations, financial institutions, fund of funds, governments, and high net-worth individuals. Highland is headquartered in Dallas, Texas and maintains offices in New York, Sao Paolo, Singapore, and Seoul.
Creditflux Award Disclosure Statement
In addition to awards for the best individual CLOs in different categories, there are awards for the best managers overall. These awards are based on each manager’s performance across all of their CLOs. The Creditflux Manager Awards are given according to rigorous, quantifiable and relevant measures of performance. The credit hedge fund awards are based on a methodology that rewards performance weighted by volatility relative to a fund’s redemption profile. Funds that promise liquidity need to deliver stable returns; those that lock up investors’ capital need to achieve greater absolute performance. CLO performance is measured in terms of liquidation IRR: the total return equity investors would have received if their CLO had been liquidated on December 31, 2006. This takes account of equity distributions and the net asset value of the portfolio, and rewards managers that have delivered the best returns to equity while giving a cushion to debt investors. Data for the awards calculations is submitted by managers and supported by figures from CLO-i. Finalists for the 2007 Creditflux Manager of the Year award were BlackRock, Highland Capital Management and Prudential M&G. Highland Capital Management won the award.