James Dondero's Global Allocation Fund Receives Morningstar's 5-Star Rating

Jason3

Just wanted to repost the Barron's interview here and point out the new 5-star rating by Morningstar on Dec. 8, 2014

Manager's Bio
Name: James Dondero
Age: 51
Title: Co-founder, president, portfolio manager

Scouring the Globe for Cheap Stocks and Bonds
Jim Dondero of the Highland Global Allocation Fund had a banner 2013. Here's what he's buying now.

Jim Dondero is a hunter who knows that you can't hit your target every time.

But Dondero and Mark Okada, who co-founded Highland Capital Management, a Dallas asset manager known for investing in distressed debt, shot a bull's-eye last year—a 30% return—in the Highland Global Allocation Fund (ticker: HCOAX).

That's a neat trick for a fund that is about 60% stocks, 40% bonds. Thanks in part to a big position in American Airlines Group stock (AAL), which tripled, as well as some of its debt holdings, the fund's performance was three times that of other funds in Morningstar's moderate risk "world allocation" category.

Dondero and his team of managers can hunt the globe, bundling their fixed-income expertise with stock picks across industries. The fund strategy was more equity-focused until 2013, and that especially smarted in 2008, when the fund sank 33%, or about 10 points worse than comparable funds. Willingness to take risks in turnaround stories has paid off recently, but Dondero does play defense: He can short stocks, and has been known to hold a significant cash position.

As a firm, Highland took its lumps during the financial crisis, shuttering two hedge funds as investors ran for the hills. Today, Highland has roughly $19 billion in assets under management, and a focus on collateralized loan obligations (CLOs) and alternative strategies in hedge funds, mutual funds and other portfolios.

Excerpts of our conversation with Dondero follow: He is eyeing Puerto Rico debt, he thinks Europe investments have had their run and suggests other areas where investors might take profits.

You can read the rest of the article here: http://online.barrons.com/articles/SB50001424053111904628504579423100003089692

Ted

@MFO Members: HCOAX is ranked #20 out of 122 in the (WA) fund category by U.S. News & World Report. I guess this post is by Dimitra Defotis the authur of the article.
Regards,
Ted