Skip to main content

Portfolio Update Call: February 29, 2024 at 2:00 PM CST 

Hear from NexPoint’s Scott Johnson, Managing Director and Portfolio Manager, and Kevin Fullmer, Director of Product Strategy, as they discuss portfolio updates and recent performance.

VIEW RECORDING
View the Q4 Presentation
Download HFRO Fact Sheet
Fund Materials

Fact Sheet

HFRO Annual Report
Fund Materials

Annual Report

HFRO Prospectus
Fund Materials

Prospectus

Fund Documents
Fund Materials

Fund Documents

SEC Filings
Fund Materials

SEC Filings

Fund Information 

Highland Opportunities & Income Fund Overview

The Highland Opportunities and Income Fund (NYSE:HFRO) is a closed-end fund managed by NexPoint Asset Management, L.P. The Fund seeks to provide growth of capital along with income.

  • Focused on growth of capital and income

  • Invests in real estate securities, secured and unsecured fixed-rate loans and corporate bonds, mezzanine securities, structured products, convertible and preferred securities, equities (public and private), futures and options, and floating rate investments

  • At least 25% of assets invested in securities or other instruments directly or indirectly secured by real estate

Quarterly Update

Q4 2023 Update Call

The HFRO portfolio management team reflects on key events and developments related to the Fund and its portfolio over the past quarter.

View Call Recording
Quarterly Update

Q4 2023 Investor Presentation

See the quarterly HFRO investor presentation with information on top holdings and other fund and portfolio updates.

View Presentation
Fund Information 

Fund NAV (As of Apr 11, 2024)
SymbolHFRO
Inception01/13/00
NAV$12.82

Fund Information 

Join the HFRO mailing list to receive Fund communications via email. Follow the link below to sign up.

Sign Up

Fund Updates

Update on Distribution Change | January 4, 2024

The Highland Opportunities and Income Fund (NYSE: HFRO) (“HFRO” or the “Fund”) announced an update to the regular monthly distribution.

On January 4, 2024, the Fund declared a regular monthly distribution on its common stock of $0.0385 per share, payable on January 31, 2024, to shareholders of record at the close of business January 24, 2024.

The Fund adjusted the monthly distribution rate to align the distribution with the current portfolio and investment objective.

Effective June 15, 2023, the Fund changed its name and investment objective to focus on income and growth. The change was intended to expand the Fund’s universe of opportunistic investments and provide flexibility to seek growth of capital along with income opportunities. The new distribution level better aligns with this investment objective and supports growth-oriented investment opportunities in the portfolio.

Additional considerations in the distribution change include:

  • Sources of distribution – As HFRO’s portfolio has shifted its primary focus from bank loans to more diversified investments in real estate and private equity, the sources of distribution have similarly shifted from net investment income to capital gains and return of capital. As such, the monthly distribution payout exceeded the Fund’s earn rate for some time, creating an unstainable dynamic that could negatively impact the portfolio if the distribution amount had remained unchanged. The reduction in the monthly distribution amount better reflects the cash flow from interest income and capital gains under HFRO’s current portfolio composition and investment strategy. While the distribution change is intended to create a more sustainable monthly distribution level, the Fund may make special distributions as it monetizes certain holdings. Many of these holdings are not income-producing assets and therefore do not support monthly distribution payments. The recent distribution change provides more flexibility in the distribution to reflect the composition of the underlying assets.
  • Current and future investment opportunities – Many of the Fund’s top holdings represent longer-term, high-conviction investments that tend to be less liquid in nature. The Adviser believes the return profile of the Fund’s current investments offers better long-term value for shareholders than liquidating assets to maintain monthly distributions at the previous rate. Further, maintaining a more sustainable monthly distribution better positions HFRO to realize growth-oriented investment opportunities and maximize the value of those opportunities for shareholders.
  • Initiatives to narrow the discount – The Adviser continues to pursue initiatives to narrow the discount between the Fund’s share price and its net asset value (NAV). Reducing the distribution would preserve cash for share repurchases and other initiatives that may help narrow the discount and create value for shareholders.

Additional information on the current portfolio, the Fund’s 2023 performance, and the recent distribution change will be addressed on the quarterly call with the portfolio management team on Thursday, February 29, 2024. Call details and a registration link will be included in investor communications closer to the call date. Participants will be able to submit questions ahead of time to be addressed on the call.

About the Highland Opportunities and Income Fund

The Highland Opportunities and Income Fund (NYSE: HFRO) is a closed-end fund managed by NexPoint Asset Management, L.P. For more information visit nexpointassetmgmt.com/opportunities-income-fund/.

Effective June 15, 2023, the Fund changed its name to the Highland Opportunities and Income Fund to reflect a new investment objective. Under the modified investment objective, the Fund will pursue growth of capital along with income. For more information visit Highland Income Fund Announces Share Repurchase Program, Changes to Fund Name and Investment Objective – NexPoint Asset Management, L.P.

About NexPoint Asset Management, L.P.

NexPoint Asset Management, L.P. is an SEC-registered investment adviser. It is the adviser to a suite of registered funds, including open-end mutual funds, closed-end funds, and an exchange-traded fund. For more information visit nexpointassetmgmt.com.

Investors should consider the investment objectives, risks, charges, and expenses of the Highland Opportunities and Income Fund carefully before investing. This and other information can be found in the Fund’s prospectus, which may be obtained by calling 1-800-357-9167 or visiting nexpointassetmgmt.com.  Please read the prospectus carefully before you invest.

The distribution may include a return of capital. Please refer to the 19(a)-1 Source of Distribution Notice on the NexPoint Asset Management website for Section 19 notices that provide estimated amounts and sources of the fund’s distributions, which should not be relied upon for tax reporting purposes.

No assurance can be given that the Fund will achieve its investment objectives.

Shares of closed-end investment companies frequently trade at a discount to net asset value. The price of the Fund’s shares is determined by a number of factors, several of which are beyond the control of the Fund. Therefore, the Fund cannot predict whether its shares will trade at, below or above net asset value. Past performance does not guarantee future results.

Closed-End Fund Risk: The Fund is a closed-end investment company designed primarily for long-term investors and not as a trading vehicle. No assurance can be given that a shareholder will be able to sell his or her shares on the NYSE when he or she chooses to do so, and no assurance can be given as to the price at which any such sale may be affected.

Credit Risk: The Fund may invest all or substantially all of its assets in Senior Loans or other securities that are rated below investment grade and unrated Senior Loans deemed by NexPoint to be of comparable quality. Securities rated below investment grade are commonly referred to as “high yield securities” or “junk securities.” They are regarded as predominantly speculative with respect to the issuing company’s continuing ability to meet principal and interest payments. Non-payment of scheduled interest and/or principal would result in a reduction of income to the Fund, a reduction in the value of the Senior Loan experiencing non-payment and a potential decrease in the NAV of the Fund. Investments in high yield Senior Loans and other securities may result in greater NAV fluctuation than if the Fund did not make such investments.

Real Estate Industry Risk: Issuers principally engaged in real estate industry, including real estate investment trusts, may be subject to risks similar to the risks associated with the direct ownership of real estate, including: (i) changes in general economic and market conditions; (ii) changes in the value of real estate properties; (iii) risks related to local economic conditions, overbuilding and increased competition; (iv) increases in property taxes and operating expenses; (v) changes in zoning laws; (vi) casualty and condemnation losses; (vii) variations in rental income, neighborhood values or the appeal of property to tenants; (viii) the availability of financing and (ix) changes in interest rates and leverage.

Illiquidity of Investments Risk: The investments made by the Fund may be illiquid, and consequently the Fund may not be able to sell such investments at prices that reflect the Investment Adviser’s assessment of their value or the amount originally paid for such investments by the Fund.

Ongoing Monitoring Risk: On behalf of the several Lenders, the Agent generally will be required to administer and manage the Senior Loans and, with respect to collateralized Senior Loans, to service or monitor the collateral. Financial difficulties of Agents can pose a risk to the Fund.

Update on Credit Suisse Case | July 13, 2023

The Highland Opportunities and Income Fund (NYSE:HFRO) (“HFRO”), a closed-end investment company managed by NexPoint Asset Management, L.P. (the “Adviser”), announced an update in the case against Credit Suisse, AG, Cayman Islands Branch, and Credit Suisse Securities (USA), LLC (“Credit Suisse”).

On February 14,  2023, the Dallas Court of Appeals issued a ruling reducing the judgment to an amount that,  including offsets for prior settlement proceeds received by the funds,  may result in the two funds recovering zero net dollars on the outstanding judgment.  The plaintiff will appeal this to the Texas Supreme Court for interpretation of its prior order.

We do not believe the recent acquisition of Credit Suisse Group AG by UBS Group AG will impact the case against Credit Suisse at this time.

Background on the Case

The case was originally filed in 2013. Following a bench trial and jury trial, the Court issued its original judgment in favor of Claymore in 2015, which was confirmed by an appellate court in 2018. An appeal of that ruling sent the case to the Texas Supreme Court, which heard the case on January 8, 2020.

On April 24, 2020, the Texas Supreme Court issued an order that affirmed in part and reversed in part the 2018 ruling from the court of appeals. In the April 2020 order, the court upheld the $40 million fraud verdict that resulted from the jury trial; however, it did not uphold the contract damages and equitable relief awarded to Claymore by the trial court following the bench trial.

In its opinion, the Texas Supreme Court noted procedural issues related to the calculation of damages among the reasons for reversing part of the appellate court ruling. It remanded the case to the trial court to determine the appropriate damages calculations and enter a new damages award.

On June 28, 2021, the 134th Judicial District Court (the “Court”) issued a judgment against Credit Suisse, awarding $121 million to Claymore Holdings LLC (“Claymore”), the entity formed to pursue the collective claims on behalf of HFRO and NexPoint Diversified Real Estate Trust (NYSE:NXDT) (together the “Funds”). As legal proceedings are ongoing and all recoveries remain contingent, no award amount has been recorded in the Funds’ net asset values at this time.

The case is Claymore Holdings LLC v. Credit Suisse AG, Cayman Islands Branch et al., case number 05-21-00649-CV, in the Court of Appeals for the Fifth District of Texas at Dallas.

Investor Presentations

Press Releases

Highland Opportunities and Income Fund Announces the Regular Monthly Distribution

DALLAS, April 1, 2024 /PRNewswire/ — The Highland Opportunities and Income Fund (NYSE: HFRO) (“HFRO” or the “Fund”) today announced its regular monthly distribution on its common stock of $0.0385 per share. The distribution will…

Highland Opportunities and Income Fund Announces the Regular Monthly Distribution

DALLAS, March 1, 2024 /PRNewswire/ — The Highland Opportunities and Income Fund (NYSE: HFRO) (“HFRO” or the “Fund”) today announced its regular monthly distribution on its common stock of $0.0385 per share. The distribution will…

Highland Opportunities and Income Fund Announces the Regular Monthly Distribution

DALLAS, Feb. 1, 2024 /PRNewswire/ — The Highland Opportunities and Income Fund (NYSE: HFRO) (“HFRO” or the “Fund”) today announced its regular monthly distribution on its common stock of $0.0385 per share. The distribution will…

Highland Opportunities and Income Fund Announces Investor Update Call

DALLAS, Jan. 8, 2024 /PRNewswire/ — The Highland Opportunities and Income Fund (NYSE:HFRO) (“HFRO” or the “Fund”) announced today that the Fund is scheduled to host a conference call on Thursday, February 29,…

Highland Opportunities and Income Fund Announces the Regular Monthly Distribution

DALLAS, Jan. 4, 2024 /PRNewswire/ — The Highland Opportunities and Income Fund (NYSE: HFRO) (“HFRO” or the “Fund”) today announced its regular monthly distribution on its common stock of $0.0385…

Disclosures
Investment returns and principal value will fluctuate so that an investor’s shares when redeemed may be worth more or less than their original cost. 
Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange and frequently trade at prices lower than their net asset value, which may increase an investor’s risk of loss. Net asset value (“NAV”) is total assets less total liabilities, which includes preferred shares, divided by the number of common shares outstanding. At the time of sale, your shares may have a market price that is above or below NAV and may be worth more or less than your original investment. For additional information, please contact your investment adviser or visit www.nexpointassetmgmt.com.
Please consider the investment objectives, risks, charges, and expenses of the Highland Income Fund carefully before investing. A prospectus with this and other information about the Highland Income Fund can be found on the Literature tab above.
Registered investment companies like HFRO are subject to certain risks.
  • Credit Risk. The risk that HFRO could lose money if the issuer or guarantor of a fixed income security, or the counterparty of a derivatives contract or repurchase agreement, is unable or unwilling (or is perceived to be unable or unwilling) to make a timely payment of principal and/or interest, or to otherwise honor its obligations.
  • Illiquidity of Investments Risk. The investments made by the Fund may be illiquid, and consequently the Fund may not be able to sell such investments at prices that reflect the Investment Adviser’s assessment of their value or the amount originally paid for such investments by the Fund.
  • Industry Concentration Risk. HFRO must invest at least 25% of the value of its total assets at the time of purchase in securities of issuers conducting their principal business activities in the real estate industry. HFRO may be subject to greater market fluctuations than a fund that does not concentrate its investments in a particular industry. Financial, economic, business, and other developments affecting issuers in the real estate industry will have a greater effect on HFRO, and if securities of the real estate industry fall out of favor, HFRO could underperform, or its NAV may be more volatile than, funds that have greater industry diversification.
  • Interest Rate Risk. The risk that debt securities, and HFRO’s net assets, may decline in value because of changes in interest rates. Generally, debt securities will decrease in value when interest rates rise and increase in value when interest rates decline.
  • Leverage Risk. Leverage may increase the risk of loss, cause fluctuations in the market value of HFRO’s portfolio to have disproportionately large effects or cause our NAV to decline faster than it would otherwise.
  • Ongoing Monitoring Risk. On behalf of the several Lenders, the Agent generally will be required to administer and manage the Senior Loans and, with respect to collateralized Senior Loans, to service or monitor the collateral. Financial difficulties of Agents can pose a risk to the Fund.
  • Pandemics and Associated Economic Disruption. An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in December 2019 and subsequently spread internationally. This coronavirus has resulted in the closing of borders, enhanced health screenings, healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general anxiety and economic uncertainty. It is not known how long any negative impacts, or any future impacts of other significant events such as a substantial economic downturn, will last. Health crises caused by outbreaks of disease, such as the coronavirus, may exacerbate other preexisting political, social, and economic risks. This outbreak, and other epidemics and pandemics that may arise in the future, could negatively affect the global economy, as well as the economies of individual countries, individual companies, and the market in general in significant and unforeseen ways. For example, a widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, which could adversely affect HFRO’s performance, the performance of the securities in which HFRO invests, lines of credit available to HFRO and may lead to losses on your investment in HFRO. In addition, the increasing interconnectedness of markets around the world may result in many markets being affected by events or conditions in a single country or region or events affecting a single or small number of issuers.
  • Real Estate Market Risk. HFRO is exposed to economic, market and regulatory changes that impact the real estate market generally and through its investment in NFRO REIT Sub, LLC (the “REIT Subsidiary”), which may cause HFRO’s operating results to suffer. Several factors may prevent the REIT Subsidiary’s properties and other real estate-related investments from generating sufficient net cash flow or may adversely affect their value, or both, resulting in less cash available for distribution, or a loss, to us. These factors include: national, regional and local economic conditions; changing demographics; the ability of property managers to provide capable management and adequate maintenance; the quality of a property’s construction and design; increases in costs of maintenance, insurance, and operations (including energy costs and real estate taxes); potential environmental and other legal liabilities; the level of financing used by the REIT Subsidiary and the availability and cost of refinancing; potential instability, default or bankruptcy of tenants in the properties owned by the REIT Subsidiary; the relative illiquidity of real estate investments in general, which may make it difficult to sell a property at an attractive price or within a reasonable time frame. The full extent of the impact and effects of the recent outbreak of COVID-19 on the future financial performance of HFRO, and specifically, on its investments and tenants to properties held by its REIT Subsidiary, are uncertain at this time. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown.
  • Senior Loans Risk. The risk that the issuer of a senior may fail to pay interest or principal when due, and changes in market interest rates may reduce the value of the senior loan or reduce HFRO’s returns. The risks associated with senior loans are similar to the risks of high yield debt securities. Senior loans and other debt securities are also subject to the risk of price declines and to increases in interest rates, particularly long-term rates. Senior loans are also subject to the risk that, as interest rates rise, the cost of borrowing increases, which may increase the risk of default. In addition, the interest rates of floating rate loans typically only adjust to changes in short-term interest rates; long-term interest rates can vary dramatically from short-term interest rates. Therefore, senior loans may not mitigate price declines in a long-term interest rate environment. HFRO’s investments in senior loans are typically below investment grade and are considered speculative because of the credit risk of their issuers.
Effective May 20, 2019, the Fund changed its name to Highland Income Fund and expanded its investment strategy by removing the Fund’s policy of, under normal market circumstances, investing at least 80% of its net assets in floating-rate loans and other securities deemed to be floating-rate instruments. See the March 20, 2019 press release for further details regarding the Fund’s name change and expanded investment strategy: “Highland Floating Rate Opportunities Fund Announces Name Change to Highland Income Fund
Effective shortly after close of business on November 3, 2017, the Highland Floating Rate Opportunities Fund converted from an open-end fund to a closed-end fund, and began trading on the NYSE under the symbol HFRO on November 6, 2017. The performance data presented above reflects that of Class Z shares of the Fund when it was an open-end fund, HFRZX. The closed-end Fund pursues the same investment objective and strategy as it did before its conversion.
Glossary: Click here for important terms and definitions
Source: SEI Investments Global Funds Services