Court Dismisses Pension Lawsuit Against Highland Capital

Highland Capital Management, a Dallas-based investment adviser with approximately $24 billion in assets under management, has announced that a lawsuit from the Houston Municipal Employees Pension System has been dismissed.

(October 24, 2011) — A lawsuit brought against Highland Capital Management by the Houston Municipal Employees Pension System has been dismissed by a Delaware court.

“No compensation in any form has passed directly or indirectly from any of the defendants to the plaintiff or the plaintiff’s attorneys in connection with the dismissal of this lawsuit, and no promise to give any such compensation has been made,” according to a statement released by the Dallas-based investment adviser, which manages about $24 billion. “In a past statement, Highland stated that the lawsuit was meritless and would be dismissed. The firm also stated that this action was an attempt to create financial leverage for one party’s benefit at the expense of all other investors in the Highland Crusader Fund and to derail an investor-led mediation process. That effort failed, as the investor-led process produced a plan of distribution which was approved by approximately 86% of investors.”

The $1.9 billion Houston Municipal Employees Pension System sued hedge fund operator Highland Capital Management in May, along with JPMorgan Chase, over the shut Highland CrusaderFund, which was set up to invest in distressed corporate debt. The suit, filed in Delaware Chancery court, alleged that Highland, the largest hedge fund manager in Texas, and the Crusader Fund failed to guard investors while it collapsed, freezing investor withdrawals while protecting its own hedge fund network.

The Crusader Fund “was harmed by virtue of being stuck with poor quality assets that it would not have had if the partnership had been managed in the best interests of the partnership and its limited partners,” lawyers for the pension plan said in the complaint filed in Delaware Chancery Court.

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In a release following the dismissal of the suit, the firm stated: “Highland is pleased to put this matter behind it and continues to work in the best interest of all investors and execute the approved distribution plan for Highland Crusader Fund.”

The case number is 6510-CS in the Court of Chancery of the State of Delaware.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Institutional investment managers have an increasingly negative outlook on US economic growth, yet many still see opportunities in the US equity markets, according to a quarterly survey by Northern Trust.

(October 24, 2011) — Institutional investment managers are growing increasingly pessimistic about the US economy, but see value in US equity markets, a quarterly survey by Northern Trust has revealed.

The third quarter 2011 Northern Trust Global Advisors (NTGA) manager survey showed that a total of 75% of managers believe US equities are undervalued — US large cap equities were the highest ranked asset class, while technology was the highest ranked sector in the third quarter.

“After what was clearly an incredibly challenging quarter, our managers seem to be saying that although they see plenty of opportunities in the market at current valuations, it’s buyer beware given the considerable headwinds that may be coming our way.” said Christopher Vella, Chief Investment Officer for NTGA, the multi-manager business of Northern Trust.

The study showed that the European debt crisis is perceived to be the biggest risk to equity markets in the next six months. A total of 63% of managers anticipate the European debt crisis will spill over to other areas of the market.

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Furthermore, the study showed that while 39% of managers expect corporate earnings to decline in the fourth quarter of 2011 compared to 15% last quarter, 36% of managers expect US GDP growth to decelerate over the next six months, up from 21% in the second quarter. Northern Trust also revealed that investors are holding onto cash, with 23% holding a higher-than-normal level of cash in the third quarter, up from 12% in the previous quarter.

Kelly Finegan, NTGA Investment Analyst, added: “There has been a clear trend in the markets away from more economically sensitive sectors in favor of those that can hold up if the economic indicators and markets continue to be weak…Overall, managers’ outlooks are more negative than 3 months ago, but there is still some optimism and managers feel there are numerous areas of the market that offer attractive investments.”

For its quarterly survey, Northern Trust polled fixed income and equity managers across value and growth styles, with a bias toward fundamental, bottom-up stock picking strategies. The survey of 100 investment firms that participate in Northern Trust’s manager-of-managers program was conducted in late September.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742