The former NexPoint Strategic Opportunities Fund (NYSE:NHF) has officially changed its name to reflect its transition to become a REIT (real estate investment trust).
Now, the NexPoint Diversified Real Estate Trust will allow investors to dabble in real estate without dealing with direct investment in physical properties. Here's what the transition entails and what it means for your investments.
NexPoint changes its fund name
The NexPoint Strategic Opportunities Fund, which trades under the ticker symbol "NHF", has changed its name to reflect its ongoing REIT conversion. The new name, "NexPoint Diversified Real Estate Trust," will go into effect on Nov. 8. The NHF ticker will also change to reflect the new name, to "NXDT".
The NexPoint REIT conversion, explained
NHF has operated as a closed-end fund primarily investing in below-investment-grade debt, equity securities, and real estate since its inception in 2006. It also held the ability to hedge risk. The fund's goal was to outperform the Dow Jones Credit Suisse Hedge Fund and HFRX Global Hedge Fund indexes and provide monthly dividends.
On Aug. 28, 2021, shareholders approved a motion to convert NHF to a diversified REIT. Once the shareholder approval went through, the company began the REIT conversion process.
NXDT represents the shift from a registered investment company to a diversified REIT. This process requires repositioning the fund's portfolio to achieve REIT tax status. Because the transition is being made during the 2021 tax year, the fund will qualify for REIT taxation in the upcoming tax season.
What's next for NexPoint investments?
Once the SEC grants NHF a deregistration order, NXDT will be officially underway. Investors don't have to change anything about their positions because all of the shifts are related to the fund's format and positioning.
The new fund will provide dedicated exposure to real estate markets, homing in on NexPoint's existing debt securities strategy. Specifically, NXDT will target real estate like self storage, single-family rentals, and office spaces. Other types of properties, like multifamily, will take up a smaller chunk of the fund's overall pie.
Cathie Wood is NexPoint's independent director
In July 2020, ARK Invest founder Cathie Wood became an independent director to NexPoint's board of directors. "We believe Ms. Wood brings a fresh perspective to the board and a unique background that complements the current directors," NexPoint CEO James Dondero said at the time.
Considering Wood's boundary-pushing ways, investors wouldn't be surprised to learn that she had something to do with NexPoint's REIT conversion.
REITs like NexPoint help you indirectly invest in real estate.
For investors, a transition to a REIT could be a welcome shift. Whereas housing costs cooled in Sept. 2021 along with temperatures, experts predict prices will inflate again in the spring. Real estate investment platforms such as Fundrise are on the rise, and traditional investing models are pivoting to keep pace.
Historically, NHF hasn't performed splendidly in the market. Its shares lost about three-quarters of their value in the first three years of the fund's life. In more recent times, the fund's one-year return is sitting at 61.01 percent, a return that reflects the popping housing market. However, a wider vantage point shows volatility in the fund. NexPoint believes that real estate is the place to focus right now. Ultimately, its performance will have to speak for itself.