Yahoo Finance | What this year’s top fund managers are doing to smoke the competition

As big names like Facebook, Alphabet and General Electric have floundered, less popular names like Mulesoft (MULE), Vericel (VCEL) and Axon Enterprise (AAXN) have powered the year’s best performing funds.

After a strong start to the year on the back of a blockbuster 2017, U.S. stocks broadly settled into a malaise beginning on Feb. 1. The Nasdaq (^IXIC) and Russell 2000 (^RUT) have only edged into positive territory for 2018 after a recent hot streak, and the benchmark S&P 500 (^GSPC) remains negative along with the Dow (^DJI).

But some funds have managed to provide strong returns this year with the top performers owing much of their success to a heavy dose of outperformance from small-cap stocks and little-known equities in the technology and health care sectors…

… Highland Capital Management President Jim Dondero, who manages the firm’s small cap equity fund, said investment in biotech and restructuring companies, such as MPM Holdings (formerly Momentive) and Vistra Energy (formerly TCEH Corp.) have been key to his fund outperforming the market as one of the 10 top performers.

“The portfolio is overweight innovative biotech companies that we don’t believe will be negatively impacted by healthcare reform,” Dondero said. “The fund also has a number of restructured equities — opportunities we identified via our extensive activity in credit — that have contributed to year-to-date performance.”…

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Highland Capital