If you are an investor who sustained financial losses from the Highland Floating Rate Advantage Funds, please contact the securities fraud law firm of Shepherd Smith Edwards and Kantas, LTD, LLP right away and ask for your free case evaluation.
Unfortunately, the Highland Floating Rate Funds, which have produced negative returns over five years, continue to be a source of dismay for investors. Funds include the Class Z Shares (Symbol: XLAZX), Class C Shares (Symbol: XLACX), and Class A Shares (Symbol: XSFRX).
Per Highland sales collateral, the Highland funds are purported to use leverage to up the yield potential while aiming for credit risk management and capital reservation. Many of the investors that chose to back the Highland Floating Rate Funds did so because they thought that a greater return was offered without the downside of substantial risks. However, a reason that the funds didn’t do well is that the loans they were invested in had been rated as “junk” or lower than investment grade.
Last year, the Highland Floating Rate Fund and the Highland Floating Rate Advantage Fund became the Highland Floating Rate Opportunities Funds (Class C shares, B shares, Class Z Shares, and Class A Shares). Also known as “leveraged loans” to borrowers, these bonds possess a certain amount of debt relative to equity.
It wasn’t too long ago that FINRA put out an alert to investors cautioning against the chasing of returns in floating-rate funds, which have grown in popularity over the last 12 years. Despite their low-risk interest rates, floating rate funds come with a more significant credit risk. Also, portfolios tend to welcome borrowers with a higher default rate than bonds that are investment grade. The SRO warns that while chasing returns may seem like an easy way to make more money, as opposed to going with a more traditional investment, this is not always the wisest choice.
FINRA has said that rather than basing the decision to invest on an investment’s potential return, an investor also needs to look at what is behind an investment’s yield. Knowing how the investment works, fully comprehending the risks involved, and being aware of the fees involved are also essential.
Please contact Shepherd Smith Edwards and Kantas, LTD, LLP to discuss your Highland Floating Rate Funds-related losses today. There may be a way to recoup your losses. There is a possibility that your broker downplayed the risks of investing in these funds, failed to make sure you understood the risks involved, or recommended this investment even though it was not suitable for you.
Are ‘Floating-Rate’ Funds Safe?, Smart Money, August 23, 2011
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FINRA Says Charles Schwab Corp. is Making Customers Waive Right to Pursue Class Action Lawsuits, Stockbroker Fraud Blog, February 8, 2012
SEC and SIPC Go to Court to Over Whether SIPA Protects Stanford Ponzi Fraud Investors, Stockbroker Fraud Blog, February 6, 2012
Two Ex-Credit Suisse Executives Plead Guilty to Mortgage-Backed Securities Fraud, Institutional Investor Securities Blog, February 7, 2012
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