Fund Evaluator:
NexPoint Merger Arbitrage Z (HMEZX)
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Best Performing in Event Driven Over the Last Year
| 5.1% | NexPoint Merger Arbitrage Z (HMEZX) |
| -1.5% | NexPoint Event Driven Z (HHCZX) |
Fund Details
NexPoint Merger Arbitrage Z Overview
NexPoint Merger Arbitrage Z (HMEZX) is an actively managed Alternative Event Driven fund. NEXPOINT FUNDS I launched the fund in 2016.
The investment seeks to generate positive absolute returns. The fund normally invests at least 80% of the value of its total assets (net assets plus the amount of any borrowings for investment purposes) in securities of companies that are involved in publicly-announced mergers (including mergers through takeovers and tender offers, so long as tender offers are being used to effect a merger) ("Merger Transactions") or companies that the Adviser believes may be involved in Merger Transactions. It engages in risk arbitrage strategies, particularly merger arbitrage strategies, in order to achieve its investment objective. The fund is non-diversified.
About NexPoint Merger Arbitrage Z (HMEZX)
There are 3 members of the management team with an average tenure of 7.29 years: James Dondero (2016), Scott Johnson (2022), Bradford Heiss (2018). Management tenure is more important for actively managed funds than passive index funds.
The fund has 1 primary benchmark: Bloomberg US Agg Bond TR USD index with a weighting of 100%. NexPoint Merger Arbitrage Z has 66 securities in its portfolio. The top 10 holdings constitute 74.1% of the fund’s assets. The fund meets the SEC requirement of being classified as a nondiversified fund. The fund is not considered to have an ESG focus with its investment selection and management.
NexPoint Merger Arbitrage Z is part of the Alternative Strategies global asset class and is within the Alternative fund group. NexPoint Merger Arbitrage Z has 1.0% of its portfolio invested in foreign issues. The overall assets allocated to domestic stock is 93.6%. There is 4.7% allocated to foreign stock, and 0.0% is allocated to preferred stocks. The bond allocation as a percentage of total assets is 1.7% (5.5% domestic bond, -3.8% foreign bond and 0.0% convertible bond). NexPoint Merger Arbitrage Z has 0.0% of the portfolio in cash.
Assets Under Management
The fund has $1 billion in total assets, which is above the $329 million average for the Event Driven category. Normally, lower assets under management translates to higher average expense ratios, and greater total assets are desired. However, for some investment categories, such as small-cap investing, it may be difficult for the manager to fully employ the desired active strategy if assets grow too large or too quickly.
HMEZX Performance and Fees
The expense ratio measures how much of a fund’s assets are used for administrative expenses and operating expenses, including adviser fees and fees for the transfer agent and custodial services. The NexPoint Merger Arbitrage Z expense ratio is high compared to funds in the Event Driven category. NexPoint Merger Arbitrage Z has an expense ratio of 1.90%, which is 1% lower than its category average, making the fund expense ratio grade a C. While it is difficult to predict returns, it is known that high annual expense ratios reduce your rate of return, and excessive fees are difficult to overcome. Active management normally comes with higher expense ratios than passive index management. Certain investment categories such as small company and foreign also normally have higher expense ratios. It is best to compare fund expense ratios against the category averages for meaningful assessments.
High portfolio turnover can translate to higher expenses and lower aftertax returns. NexPoint Merger Arbitrage Z has a portfolio turnover rate of 406%, indicating that holds its assets around 0.0 years. By way of comparison, the average portfolio turnover is 218% for the Event Driven category.
Recently, in the month of July 2026, NexPoint Merger Arbitrage Z returned 0.4%, which earned it a grade of B, as the Event Driven category had an average return of 0.0%. The letter grades of A, B, C, D and F are based upon relative rankings within the investment category. A grade of A, for example, would indicate that the return is in the highest 20% for that time period compared to all funds in that category.
NexPoint Merger Arbitrage Z has a trailing yield of 5.05%, which is above the 2.23% category average. The fund normally distributes its income quarterly and its capital gains annually.
It’s natural to seek the best-performing investments, but you must consider the relationship between risk and return and the impact of costs and taxes on your realized returns.
NexPoint Merger Arbitrage Z Grades
Year to date, the fund has returned 2.3%, 0.1 percentage points worse than the category, which translates into a grade of C. The fund has returned 5.1% over the past year (grade of C), 6.3% over the past three years (grade of B) and 4.6% per year over the past five years (grade of B).
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HMEZX Trailing NAV Total Returns Data as of 7/31/26
| Last Month |
Last Quarter |
Ann'l. 1Yr |
Ann'l. 3Yr |
Ann'l. 5Yr |
Ann'l. 10Yr |
|
| HMEZX Return (NAV) | 0.4% | 0.9% | 5.1% | 6.3% | 4.6% | na |
| HMEZX Grade | B | B | C | B | B | na |
| +/- Category | 0.4% | 0.2% | -0.9% | -0.0% | 0.8% | na |
| Event Driven Avg | 0.0% | 0.7% | 6.0% | 6.3% | 3.9% | 4.4% |
| HMEZX Tax Cost Ratio | na | na | 2.0% | 2.0% | 2.1% | na |
HMEZX Annual NAV Total ReturnsData as of 7/31/26
| 2026 | 2025 | 2024 | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | |
| HMEZX Return (NAV) | 2.3% | 6.3% | 6.1% | 4.1% | 2.7% | 5.3% | 8.7% | 7.3% | 6.5% | 5.5% | na |
| HMEZX Grade | C | D | B | D | A | B | B | B | A | B | na |
| +/- Category | -0.1% | -2.6% | 1.9% | -0.7% | 4.3% | 2.9% | 1.0% | 0.3% | 3.4% | 0.9% | na |
| Event Driven Avg | 2.4% | 8.9% | 4.2% | 4.8% | -1.6% | 2.4% | 7.7% | 7.0% | 3.1% | 4.6% | 2.8% |
| Risk Measures | |
| Standard Deviation: | 1.2% |
| Total Risk Index: | 0.10 - Low |
| Category Risk Index: | 0.32 - Low |
| Category Risk Grade: | A (12% Rank) |
| Beta: | 0.00 |
| R-Squared: | 0% |
| Leveraged Fund: | No |
| Inverse Fund: | No |
| Portfolio Characteristics | |
| Equity Investment Style: | Small-Cap Blend |
| Bond Investment Style: | na |
| Yield: | 5.1% |
| Dividend Distribution: | Quarterly |
| Cap Gains Distribution: | Annually |
| Total Assets: | $1503 Mil |
| Fund Total Assets: | $1,416 Mil |
| Share Class Type: | Inst |
| Portfolio Turnover: | 406% |
Management Team
| Number of Managers: 3 | |||
| Longest Tenure: 10.0 years | |||
| Average Tenure: 7.3 years | |||
| Managers (Year): Dondero James (2016), Heiss Bradford (2018), Johnson Scott (2022) | |||
Portfolio Composition (as of 3/31/26)
| # of Holdings: | 66 |
| % in Top 10 Holdings: | 74.1% |
| Fund is Non-Diversified: | Yes |
| % in Foreign Issues: | 1.0% |
Portfolio Allocation |
|
| Domestic Stock: | 93.6% |
| Foreign Stock: | 4.7% |
| Preferred Stock: | 0.0% |
| Domestic Bond: | 5.5% |
| Foreign Bond: | -3.8% |
| Convertible Bond: | 0.0% |
| Other: | 0.0% |
| Cash: | 0.0% |
Purchase Information
| Fund Family: | NEXPOINT FUNDS I |
| Phone Number: | 877-665-1287 |
| Website: | www.highlandfunds.com |
| Status: | Open |
| Inception Date: | August 19, 2016 |
| Min. Initial Purchase: | $2,500 |
| Min. Initial IRA Purchase: | $ 0 |
| True No-Load: | Yes |
| Front Load Maximum: | 0.00% |
| Deferred Charge Maximum: | 0.00% |
| Redemption Charge Maximum: | 0.00% |
| 12b-1 Fee: | na |
Expenses and Fees | |
| Expense Ratio (%): | 1.90% ( Rating : High ) |
| Category Average Expense Ratio (%): | 1.92% |
| Share Class: | NexPoint Merger Arbitrage Z |
| Min. Subsequent Purchase: | $ 50 |
| Min. Subsequent IRA Purchase: | $ 0 |
