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Name

As of 12/05/2023

Price

Aum/Mkt Cap

YIELD

Annualized forward dividend yield. Multiplies the most recent dividend payout amount by its frequency and divides by the previous close price.

Exp Ratio

Expense ratio is the fund’s total annual operating expenses, including management fees, distribution fees, and other expenses, expressed as a percentage of average net assets.

Watchlist

NexPoint Merger Arbitrage Fund

HMECX | Fund

$18.82

$853 M

4.28%

$0.81

3.04%

Vitals

YTD Return

2.7%

1 yr return

2.8%

3 Yr Avg Return

3.3%

5 Yr Avg Return

4.5%

Net Assets

$853 M

Holdings in Top 10

63.8%

52 WEEK LOW AND HIGH

$18.8
N/A
N/A

Expenses

OPERATING FEES

Expense Ratio 3.04%

SALES FEES

Front Load N/A

Deferred Load 1.00%

TRADING FEES

Turnover N/A

Redemption Fee N/A

Min Investment

Standard (Taxable)

$2,500

IRA

N/A

Fund Classification

Fund Type

Open End Mutual Fund

Name

As of 12/05/2023

Price

Aum/Mkt Cap

YIELD

Annualized forward dividend yield. Multiplies the most recent dividend payout amount by its frequency and divides by the previous close price.

Exp Ratio

Expense ratio is the fund’s total annual operating expenses, including management fees, distribution fees, and other expenses, expressed as a percentage of average net assets.

Watchlist

NexPoint Merger Arbitrage Fund

HMECX | Fund

$18.82

$853 M

4.28%

$0.81

3.04%

HMECX - Profile

Distributions

  • YTD Total Return 2.7%
  • 3 Yr Annualized Total Return 3.3%
  • 5 Yr Annualized Total Return 4.5%
  • Capital Gain Distribution Frequency Annually
  • Net Income Ratio -0.44%
DIVIDENDS
  • Dividend Yield 4.3%
  • Dividend Distribution Frequency Quarterly

Fund Details

  • Legal Name
    NexPoint Merger Arbitrage Fund
  • Fund Family Name
    NexPoint Funds
  • Inception Date
    Aug 19, 2016
  • Shares Outstanding
    1291439
  • Share Class
    C
  • Currency
    USD
  • Domiciled Country
    US
  • Manager
    James Dondero

Fund Description

The Fund seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of the value of its total assets (net assets plus the amount of any borrowings for investment purposes) in securities of companies that are involved in publicly-announced mergers (including mergers through takeovers and tender offers, so long as tender offers are being used to effect a merger) (“Merger Transactions”) or companies that the Adviser believes may be involved in Merger Transactions. This investment policy is not fundamental and may be changed by the Fund without shareholder approval upon 60 days’ prior written notice to shareholders. There can be no assurance that the Fund will achieve its investment objective.
The Fund engages in risk arbitrage strategies, particularly merger arbitrage strategies, in order to achieve its investment objective. Merger arbitrage is a highly specialized investment approach generally designed to profit from the successful completion of Merger Transactions. Although a variety of strategies may be employed depending upon the nature of the reorganizations selected for investment, the simplest form of merger arbitrage activity involves purchasing the shares of an announced acquisition target at a discount to their expected value upon completion of the acquisition. The size of this discount, known as the arbitrage “spread,” may represent the Fund’s potential profit on such an investment. The merger arbitrage strategy is designed to provide performance that the Adviser believes will normally have relatively low correlation with the overall performance of stock markets.
In making merger arbitrage investments for the Fund, the Adviser is guided, without limitation, by the following general considerations:
•
Annualized and absolute returns;
•
Downside risk if a transaction is terminated;
•
Proposed financing terms;
•
Transaction size;
•
Regulatory approvals needed;
•
Anti-trust concerns; and
•
Shareholder voting requirements.
The Adviser may invest the Fund’s assets in both negotiated, or “friendly,” reorganizations and non-negotiated, or “hostile,” takeover attempts, but in either case the Adviser’s primary considerations include the likelihood that the transaction will be successfully completed and its risk-adjusted profile. The Fund may also participate in other forms of arbitrage including, without limitation, share class arbitrage. The Fund may also short a company in an announced transaction in anticipation that the deal will be terminated or deal terms will be re-negotiated. The Fund may hold a significant portion of its assets in cash and money market instruments in anticipation of arbitrage opportunities, and investments in money market instruments will not be deemed violations of the 80% test above.
Equity securities in which the Fund may invest include common stock, preferred stock, securities convertible into common stock, rights and warrants or securities or other instruments whose price is linked to the value of common stock. The Fund may invest in issuers of any market capitalization. Although the equity securities in which the Fund invests may be denominated in any currency and may be located in emerging markets without limit, the Fund will primarily invest in equity securities that are located in developed markets. Such investment may be denominated in U.S. dollars, non-U.S. currencies or multinational currency units. The Fund engages in active trading and may invest a portion of its assets to seek short-term capital appreciation.
The Fund may employ a variety of hedging strategies to seek to protect against issuer-related risk or other risks, including selling short the securities of the company that proposes to acquire the acquisition target. The Fund may invest without limitation in warrants and may also use derivatives, primarily swaps (including equity, variance and volatility swaps), options and futures contracts on securities, interest rates, commodities and/or currencies, as substitutes for direct investments the Fund can make. The Fund may also use derivatives such as swaps, options (including options on futures), futures, and foreign currency transactions (e.g., foreign currency swaps, futures and forwards) to any extent deemed by the Adviser to be in the best interest of the Fund, and to the extent permitted by the 1940 Act, to hedge various investments for risk management and speculative purposes.
The Fund may employ currency hedges (either in the forward, futures or options markets) in certain circumstances to reduce currency risk on investments in assets denominated in foreign currencies.
In implementing the Fund’s investment strategies, the Fund may invest in a wide variety of investments, such as senior loans, asset-backed securities, master limited partnerships (“MLPs”), and other investment companies, including exchange-traded funds (“ETFs”). To the extent that the Fund invests in shares of another investment company or ETF, the Fund bears its proportionate share of the expenses of the underlying investment company or ETF and is subject to the risks of the underlying investment company’s or ETF’s investments.
The Fund may borrow an amount up to 33 1/3% (or such other percentage permitted by law) of its total assets
(including the amount borrowed) less all liabilities other than borrowings. The Fund may borrow for investment purposes, to meet redemption requests, and for temporary, extraordinary or emergency purposes. The use of leverage for investment purposes increases both investment opportunity and investment risk. The Fund may seek additional income by making secured loans on its portfolio securities.
The Fund may also invest in debt securities of any kind, including debt securities of varying maturities, below investment grade securities or unrated securities of similar credit quality (commonly known as “high yield securities” or “junk securities”), debt securities paying a fixed or fluctuating rate of interest, inflation-indexed bonds, structured notes, loan assignments, loan participations, asset-backed securities, debt securities convertible into equity securities, and securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, by foreign governments or international agencies or supranational entities or by domestic or foreign private issuers.
The Adviser normally allocates the Fund’s investments across different industries and sectors, but the Adviser may invest a significant percentage of the Fund’s assets in issuers in a single or small number of industries or sectors as a result of its merger arbitrage investment strategy. As a result, the Fund’s investments may focus on the information technology and financials sectors.
The Adviser may sell securities at any time, including if the Adviser’s evaluation of the risk/reward ratio is no longer favorable.
The Fund is non-diversified as defined in the 1940 Act but intends to adhere to the diversification requirements applicable to regulated investment companies (“RICs”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Fund is not intended to be a complete investment program.
The Adviser expects that the Fund’s active or frequent trading of portfolio securities will result in a portfolio turnover rate in excess of 100% on an annual basis. As a result, the Fund may be more likely to realize capital gains, including short-term capital gains taxable as ordinary income that must be distributed to shareholders as taxable income. High turnover may also cause the Fund to pay more brokerage commissions and to incur other transaction costs, which may detract from performance. The Fund’s portfolio turnover rate and the amount of brokerage commissions and transaction costs it incurs will vary over time based on market conditions.
Read More

HMECX - Performance

Return Ranking - Trailing

Period HMECX Return Category Return Low Category Return High Rank in Category (%)
YTD 2.7% -11.6% 15.8% 55.00%
1 Yr 2.8% -33.0% 41.7% 36.89%
3 Yr 3.3%* -10.5% 13.4% 9.18%
5 Yr 4.5%* -4.8% 11.1% N/A
10 Yr N/A* -4.6% 7.6% N/A

* Annualized

Return Ranking - Calendar

Period HMECX Return Category Return Low Category Return High Rank in Category (%)
2022 -2.7% -31.7% 23.2% 43.88%
2021 0.7% -20.7% 10.7% 7.22%
2020 1.2% -12.4% 14.7% 96.67%
2019 6.2% -13.2% 12.9% 87.34%
2018 -10.7% -11.7% 7.9% N/A

Total Return Ranking - Trailing

Period HMECX Return Category Return Low Category Return High Rank in Category (%)
YTD 2.7% -11.7% 15.8% 55.00%
1 Yr 2.8% -33.0% 41.7% 33.98%
3 Yr 3.3%* -10.5% 13.4% 8.16%
5 Yr 4.5%* -4.8% 11.1% N/A
10 Yr N/A* -4.6% 7.6% N/A

* Annualized

Total Return Ranking - Calendar

Period HMECX Return Category Return Low Category Return High Rank in Category (%)
2022 1.7% -31.7% 23.2% 43.88%
2021 4.3% -20.7% 10.7% 7.22%
2020 7.3% -12.4% 14.7% 14.44%
2019 6.5% -12.7% 12.9% 39.24%
2018 5.5% -11.5% 13.2% N/A

NAV & Total Return History

HMECX - Holdings

Concentration Analysis

HMECX Category Low Category High HMECX % Rank
Net Assets 853 M 105 K 12.6 B 37.50%
Number of Holdings 114 5 2526 76.92%
Net Assets in Top 10 544 M -619 M 6.53 B 38.46%
Weighting of Top 10 63.80% 7.6% 96.1% 24.73%

Top 10 Holdings

  1. RADIUS GLOBAL INFRASTRUCTURE INC 144A 2.500000% 09/15/2026 9.18%
  2. ACTIVISION BLIZZARD INC COMMON STOCK 9.07%
  3. HORIZON THERAPEUTICS PLC COMMON STOCK 8.24%
  4. DENBURY INC COMMON STOCK 8.21%
  5. HOSTESS BRANDS LLC TL 1L 0% 06/21/2030 6/21/2030 5.24%
  6. NATIONAL INSTRUMENTS CORP COMMON STOCK 5.17%
  7. DECHRA PHARMACEUTICALS PLC COMMON STOCK 4.96%
  8. DREYFUS TREASURY PRIME CASH MANAGEMENT/ CLASS A 4.93%
  9. EMIS GROUP PLC COMMON STOCK 4.40%
  10. Imperva, Inc. 1/12/2026 4.39%

Asset Allocation

Weighting Return Low Return High HMECX % Rank
Stocks 		45.51% -57.09% 325.56% 7.69%
Bonds 		43.07% -1.04% 63.30% 98.08%
Cash 		10.72% -225.56% 102.75% 75.96%
Preferred Stocks 		0.35% 0.00% 5.67% 33.65%
Other 		0.35% -11.90% 43.69% 50.96%
Convertible Bonds 		0.00% 0.00% 95.47% 48.08%

Stock Sector Breakdown

Weighting Return Low Return High HMECX % Rank
Financial Services 		45.38% 0.00% 98.37% 22.58%
Healthcare 		18.00% 0.00% 27.28% 55.91%
Energy 		13.92% 0.00% 53.30% 3.23%
Technology 		8.17% 0.00% 100.00% 52.69%
Consumer Cyclical 		4.90% 0.00% 29.06% 22.58%
Consumer Defense 		4.00% 0.00% 30.58% 69.89%
Real Estate 		2.53% 0.00% 93.91% 25.81%
Utilities 		1.69% 0.00% 66.28% 68.82%
Industrials 		1.41% 0.00% 27.58% 62.37%
Communication Services 		0.00% 0.00% 33.72% 76.34%
Basic Materials 		0.00% 0.00% 42.74% 79.57%

Stock Geographic Breakdown

Weighting Return Low Return High HMECX % Rank
US 		34.57% -55.82% 325.56% 4.81%
Non US 		10.94% -7.09% 86.98% 50.00%

Bond Sector Breakdown

Weighting Return Low Return High HMECX % Rank
Cash & Equivalents 		4.93% 0.00% 100.00% 5.77%
Derivative 		0.35% 0.00% 30.95% 28.85%
Securitized 		0.00% 0.00% 27.70% 21.15%
Corporate 		0.00% 0.00% 100.00% 53.85%
Municipal 		0.00% 0.00% 3.82% 20.19%
Government 		0.00% 0.00% 73.33% 39.42%

Bond Geographic Breakdown

Weighting Return Low Return High HMECX % Rank
US 		43.07% -1.04% 80.93% 98.08%
Non US 		0.00% -64.71% 9.68% 32.69%

HMECX - Expenses

Operational Fees

HMECX Fees (% of AUM) Category Return Low Category Return High Rank in Category (%)
Expense Ratio 3.04% 0.73% 9.52% 8.74%
Management Fee 1.00% 0.13% 1.65% 57.69%
12b-1 Fee 1.00% 0.00% 1.00% 81.36%
Administrative Fee 0.20% 0.06% 0.40% 84.25%

Sales Fees

HMECX Fees (% of AUM) Category Return Low Category Return High Rank in Category (%)
Front Load N/A 2.75% 5.75% N/A
Deferred Load 1.00% 1.00% 5.00% 21.43%

Trading Fees

HMECX Fees (% of AUM) Category Return Low Category Return High Rank in Category (%)
Max Redemption Fee N/A 1.00% 2.00% N/A

Related Fees

Turnover provides investors a proxy for the trading fees incurred by mutual fund managers who frequently adjust position allocations. Higher turnover means higher trading fees.

HMECX Fees (% of AUM) Category Return Low Category Return High Rank in Category (%)
Turnover N/A 30.00% 483.00% 96.95%

HMECX - Distributions

Dividend Yield Analysis

HMECX Category Low Category High HMECX % Rank
Dividend Yield 4.28% 0.00% 0.75% 12.50%

Dividend Distribution Analysis

HMECX Category Low Category High Category Mod
Dividend Distribution Frequency Quarterly Annually Quarterly Annually

Net Income Ratio Analysis

HMECX Category Low Category High HMECX % Rank
Net Income Ratio -0.44% -2.49% 4.20% 71.84%

Capital Gain Distribution Analysis

HMECX Category Low Category High Capital Mode
Capital Gain Distribution Frequency Annually Annually Annually Annually

Distributions History

View More +

HMECX - Fund Manager Analysis

Managers

James Dondero

Start Date

Tenure

Tenure Rank

Aug 19, 2016

5.78

5.8%

Mr. Dondero is also the co-founder and President of Highland, founder and President of NexPoint Advisors, L.P., Chairman of the board of directors, Chief Executive Officer and member of the investment committee of NXRT, President of NexPoint Capital, Inc., President of NMCT, director for American Banknote Corporation, director for Metro-Goldwyn-Mayer, director for Jernigan Capital, Inc., Chairman of the board of directors for Cornerstone Healthcare, Chairman of the board of directors for CCS Medical, and Chairman of NexBank, an affiliated bank that is majority owned by Mr. Dondero. Mr. Dondero has over 30 years of experience investing in credit and equity markets and has helped pioneer credit asset classes. Prior to founding Highland Capital Management in 1993, Mr. Dondero served as Chief Investment Officer of Protective Life’s GIC subsidiary and helped grow the business between 1989 and 1993. His portfolio management experience includes mortgage-backed securities, investment grade corporates, leveraged bank loans, high-yield bonds, emerging market debt, real estate, derivatives, preferred stocks and common stocks. From 1985 to 1989, he managed in fixed income funds for American Express. Mr. Dondero received a BS in Commerce (Accounting and Finance) from the University of Virginia, and is a Certified Managerial Accountant and a Chartered Financial Analyst.

Bradford Heiss

Start Date

Tenure

Tenure Rank

Dec 01, 2018

3.5

3.5%

Mr. Heiss is a Managing Director at HCMFA. Prior to his current position, he served as a Director of equity investments. Before joining Highland in July 2013, Mr. Heiss spent three years as a Senior Analyst and Partner at Varna Capital where he was a Generalist covering multiple sectors for the long/short equity hedge fund. Prior to Varna, Mr. Heiss spent three years as an Analyst at Maverick Capital where he covered the U.S. Financial Services sector for the $10 billion long/short equity hedge fund. Mr. Heiss began his career at Goldman Sachs in New York, first as a Senior Analyst in the Finance Division and later as an Investment Banking Analyst in the Financial Institutions Group. Mr. Heiss holds a B.B.A. in Finance from the University of Miami and has earned the right to use the Chartered Financial Analyst designation.

Scott Johnson

Start Date

Tenure

Tenure Rank

May 05, 2022

0.07

0.1%

Mr. Johnson is a Managing Director and Portfolio Manager at NexPoint Advisors, L.P. He has over 25 years of investment management experience with extensive experience in private equity, mergers and acquisitions and long/short hedge funds. Prior to joining NexPoint he was the CEO of Enviroklean Product Development which he purchased along with a private equity group. Previously, Mr. Johnson also held positions as President of Trisun Energy Services and was the Portfolio Manager of the Income Fund, L.P., an investment fund focused on making opportunistic investments in public and private debt and equity securities. Prior to managing the Income Fund, he was a Portfolio Manager at Highland Capital Management, L.P. Prior to joining Highland, Mr. Johnson was an Associate at Wellspring Capital Management, a private equity firm focused on control-oriented buyout investments. Mr. Johnson started his career as an Analyst in the Mergers & Acquisitions group at Lehman Brothers. Mr. Johnson received a B.B.A. in Finance with honors from the University of Texas at Austin and an MBA from Harvard Business School.

Tenure Analysis

Category Low Category High Category Average Category Mode
0.08 30.59 6.3 9.42

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