News & Events

Simpson Thacher serves as counsel to the independent directors of the Highland Funds, a registered alternative fund complex made up of open-end funds, closed-end funds, a BDC and an ETF. In early November, the Highland Floating Rate Opportunities Fund converted from an open-end mutual fund to a closed-end fund. This unique conversion may be the first of its kind, and arose under unique circumstances. The fund was awarded a court judgement that, once fully litigated, could cause the fund’s net asset value to increase by as much as 30% overnight. For a fund with daily subscriptions and redemptions, this possibility required the fund’s adviser and directors to grapple with several issues, including protecting existing shareholders from being diluted by speculative investors and protecting against a liquidity mismatch in the event the fund was required to book the litigation award as an asset under generally accepted accounting principles and there was a delay in receiving payment. After consideration of a variety of alternatives in numerous meetings over the past year, the adviser recommended and the board approved the plan to convert the fund from an open-end fund to a closed-end fund. Nearly 90% of shareholders who voted on the proposal approved of the conversion.

The Simpson Thacher team included Rajib Chanda (Corporate).