How James Dondero Of Highland Capital Management Makes Investment Decisions

As the co-founder and President of Dallas, Texas-based Highland Capital Management, James Dondero has grown accustomed to making bold financial bets. He was on the of the first in the industry to see the potential of collateralized loan obligations and how to make money trading them. His success led to his company now having more than $15 billion invested in fixed income alternative assets. One of his big successes is the company’s Highland Global Allocation fund, HCOAX, which includes many of his best ideas. This fund had a greater return over the last six months than either the Russell 200 index or the S&P 500.

Unlike many funds which hold almost 400 different securities, HCOAX is made up of less than 200. Almost half of the securities are made up of themes which are concentrated on several companies all operating in the same sector. Among the themes he has recently made bets on are Argentina, master limited partnerships, and Vistra Energy which is in the middle of its restructuring process.

Communication flows both ways at Highland Capital Management. Sometimes one of the investment managers at the company suggests an idea that is taken up by James Dondero and other executives at the company. Sometimes Dondero comes up with a new idea that is then assigned to a research team that sees if the idea is feasible or not.

Among other alternative equity assets that James Dondero has developed specialties in are hedge funds, private equity funds, REITs, and institutional separate accounts. He first began working in the financial industry in 1985 when he joined American Express as a Corporate Bond Analyst and was quickly promoted to a Portfolio Manager. He also worked at Protective Life for four years, 1989 to 1993, where he built their GIC subsidiary. In 1993 he partnered with Protective Life and an associate, Mark Okada, and founded Highland Capital Group. After a number of years, he and Okada bought out Protective Life’s share of the company and both now wholly own the company.


The full story about how James Dondero makes bold financial investments can be found at Barron’s.