Hard Work, Perseverance and intelligent risk taking. Those are the attributes that have successfully brought James Dondero and Highland Capital Management a long way from the credit crisis of 2008. Dondero and his partner, Mark Okada gambled that a hedge fund with a specialty of packaging high-yield bank loans into securities in the form of collateralized loan obligations (CLOs), would be successful, a gamble that the credit crisis almost doomed. The low point came in 2008, when Highland suspended investor withdrawals from two ailing hedge funds and saw its total assets drop to $23 billion from the 2007 high of $39 billion.
In the ensuing years Highland, under James Dondero, has restored its reputation, with an eye to a long term strategy of working through its issues without a bailout. Fighting off numerous lawsuits, some of which were personal in nature, paying off debts or taking a stake in borrowers, and venturing into new areas such as Brazil and Argentina, Dondero has worked tirelessly and has been able to keep a steady course regardless of the difficulties. His efforts to save spooked investors from themselves by convincing them to stay the course alone are admirable, and had to have been very difficult.
Work is the operative word here. From dealing with investors who practically had to be saved from themselves to revamping investment strategies to the recent successful lawsuit against Credit Suisse Group AG, (Credit Suisse Group AG was ordered to pay Highland Capital Management LP $287.5 million for losses on a $540 million refinancing of a shaky real estate development.) James Dondero has never taken the easy way in any of the problems facing Highland since the 2008 meltdown that claimed so many other hedge funds.
Highland now has $21.7 billion in assets and an excellent reputation, a long way from the days when Dondero is quoted as saying: “Our name was mud.” No one is saying that now. The Dallas based hedge-fund is among the best in terms of reputation and profitability.
In a deliberate re-branding effort, the firm moved from the northern suburbs to new offices closer to Dallas’s downtown financial district, in part, according to Patrick Boyce, COO, because “It made sense to really have a rebirth of Highland, we want to make sure the world almost sees us as a new firm.”
Almost a new firm, an old fashioned work ethic and refusal to do things the easy way. Intelligent risk taking. It is exhausting to even contemplate the work and commitment it took for Dondero and his partner, Okado, to bring Highland all the way from the losses of 2008 to the success it enjoys today.
Any venture James Dondero undertakes in the future will be a good bet for investors. They at least can be assured it will get the effort, hard work and commitment to investors required to succeed. It will be interesting to see where he goes from here, I doubt very much that this energetic man will be resting on his laurels.