On January 9, 2012, Highland Funds will officially transfer management of their fund portfolios to a new entity called Pyxsis Capital. If history is any guide, Highland Floating Rate Fund investors should not expect a boost in performance following the name change. According to a 2005 study by Michael Cooper with the Krannert Graduate School of Management at Purdue University, funds that changed their names actually performed worse after the name change.
Highland’s change of identity is understandable, particularly in light of the legal backlash faced by brokers and advisors who sold the Highland Floating Rate Fund to unwary investors. See our August 2011 blog posting in the California Securities Fraud Lawyer Blog: Highland Floating Rate Funds’ Poor Performance Leads to Investor Lawsuits.
Despite the name change, the Pyxsis Floating Rate Fund’s management and investment strategy will continue to remain primarily focused in high-yield “junk bonds.” High-yield bonds are characterized by high returns as a reward for the risk inherent in investing in below investment grade securities (rated below BBB by credit reporting agencies). The family of Pyxis floating rate funds plan to invest 75% of the fund’s assets in bonds of which more than 80% are below investment grade.