FAIRFIELD, Conn. - Highland Investment Group L.P. is trying to capitalize on the ever-changing economy to launch its institutional money management efforts.
The firm, founded by Catherine C. Lawson, the former president of the Dreyfus Convertible Securities Fund, opened its doors in September with venture capital backing from Bank of Boston Co. Highland recently has begun marketing to pension funds and other tax-exempt institutional investors.
The firm uses a disciplined growth approach based on "delta forces," such as technological innovations, that are driving fundamental changes in business. The idea is to identify the agent of change - the delta force - and find companies that are dealing with it in different ways within different sectors, said Ms. Lawson, Highland's chairman and chief investment officer.
Delta forces can be non-technological factors, such as outsourcing trends and changing distribution channels, Ms. Lawson explained.
Highland's investment approach uses its core positions in companies to identify additional non-core holdings.
Once the firm identifies a delta force, it queries the core companies to find other companies that are good at handling that change, said Ms. Lawson.
The sector allocations follow the Standard & Poor's 500 Stock Index, but the holdings follow a common thread of innovation, which drives future growth, she said.
"It's not a plain-vanilla product, but draws on plain-vanilla concepts," Ms. Lawson said.
Highland's management wanted the firm to set itself apart from other emerging firms by being well run.
The founders sought out venture capital because they understood the need to be well funded as a start-up, said Ms. Lawson.
Enter Bank of Boston's BancBoston Capital subsidiary, which provided $2 million in private equity to start the firm.
A buy-out could be one exit strategy for the investors, but another possibility would be keeping Highland as a cash generator for other BancBoston acquisitions, said Ms. Lawson.
She said she wanted to concentrate on running the firm well, but recognized that good money managers are not always good business managers, so she sought out Robert Lamb III as president and chief executive officer.
Before joining Highland, he was a marketer and administrator in several other firms, including S.G. Warburg & Co., where he was vice president responsible for investment, marketing and administration.
"It's very important to recognize that this is a business first, and you don't serve the client well if you don't operate it well," said Ms. Lawson.
For example, the firm won't do soft dollars, which she described as "a terrible trap" for small firms.
Highland's target is to have $1 billion in assets under management in approximately five years, and $100 million in assets under management by the end of May 1996.
So far, the firm is marketing to institutions and has met with several manager-of-managers firms, including RCB International Inc., Washington Hackett Co. and Progress Investment Management Co. to try to join their emerging manager programs, said Ms. Lawson.
Highland also may eventually try to get subadvisory assignments from mutual fund companies, a business in which Ms. Lawson's experience with Dreyfus will give the firm some leverage.