Sagitta has launched a Cayman Island-domiciled long/short global healthcare hedge fund, writes James...
Sagitta has launched a Cayman Island-domiciled long/short global healthcare hedge fund, writes James Phillipps.
The group is looking to raise $35m over two years and has already acquired $2.7m in internal money.
Named Salix, the fund will be managed by June Scott and Eduardo Tomacelli. Scott believes the combination of her knowledge of the healthcare sector and Tomacelli's experience in running hedge funds should enable them to profit from the current volatile market conditions.
She said: 'We work together a lot already and the sector is ideal for a hedge fund. It is volatile and has a number of non-correlated sub-sectors.'
Scott currently runs Sagitta's Dublin-listed global healthcare fund, while Tomacelli already runs a US hedge fund and a US unit trust for the group.
The hedge product will invest in seven sub-sectors Sagitta has identified in the broader healthcare sector: biotechnology, pharmaceuticals, diagnostics, hospital services, drug delivery, meditech and speciality pharmaceuticals.
Scott said: 'There is a lot of overlap between the sectors, but they move in different cycles. On average, there will be more long than short positions, but that will depend on the markets.'
Investments will be selected using a combination of fundamental analysis to identify stock opportunities and technical analysis to determine the direction of the market and the timing of investment.
The long positions will generally mirror the healthcare unit trust's holdings, but the fund will also be able to short stocks and hold higher cash weightings.
The fund is currently only 20% invested, with 20 stocks held. A maximum of 5% will be invested in any one stock, although Scott expects a greater number of 2% weightings.
Sub-sector weightings have no fixed benchmarks and will vary according to the markets.
Scott said the overall healthcare sector has delivered mixed performance over the calendar year, offering up a number of both long and short positions.
She said: 'Hospital stocks have had a good run. Because the economy has been so strong, they have been able to increase their prices, but they are probably at the peak of their cycle now.'
Scott also anticipates a number of opportunities in both the pharmaceuticals and biotechnology sub-sectors, as pharmaceuticals are increasingly having to pay biotechnology companies more in licensing fees.
Fiercer competition in the drug development market is forcing pharmaceuticals to pay biotechnology companies higher royalty rates.
She said: 'There is increasingly a partnership structure between pharmaceutical firms and biotechnology companies. Pharmaceuticals used to pay high single-digit fees and royalties for clinical testing licensing deals with biotechnology companies, but now they are doing a lot of 50:50 deals.'
Slow progress in improving diversity
Share purchase deal with assets of £28m
Came into effect in January
Three examples of compensation rule issues
Buying in baskets