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[July 06, 2017]  By Lawrence Delevingne and Dion Rabouin

(Reuters) - Dallas-based Highland Capital Management LP is set to buy and expand an Argentina-focused hedge fund previously managed by Argentine fund firm MBA Asset Management, according to a person familiar with the situation.

The fund currently has assets under management of $80 million, but the person said that figure could increase to between $400 million and $500 million depending on fundraising. Highland plans to base the fund out of a new Buenos Aires office and keep its portfolio manager, Andres Pitchon. The person requested anonymity because the information is private.

The purchase was first reported by Bloomberg News.

The source said that Highland plans to position the fund conservatively ahead of the country's October midterm elections in which former President Cristina Fernandez de Kirchner will run for senate. However, if President Mauricio Macri's coalition is able to increase or hold its position, allocations could shift to a more bullish position. The fund is currently about 20 percent invested in stocks but that could increase to 40 percent.

Argentina's benchmark Merval stock index has surged since Macri's election as investors wager his removal of capital controls and market regulations will kick-start the country's economy. The Merval has risen 32 percent year-to-date.

A spokeswoman for Highland at Prosek Partners declined to comment, while a representative for MBA was not immediately available for comment.

Highland, best known as a manager of mutual and hedge funds, with affiliates controls approximately $14.9 billion, according to its website.

(Editing by Lisa Shumaker)

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