Others note continued opportunity in biotech.
Robert Christian, who analyzes hedge funds as head of research at K2 Advisors and Franklin Templeton Solutions, said biotech stock-focused managers stand out as one of his favorite strategies among the few dozen he tracks.
Christian’s optimism rests on what he called exciting new technologies that justify higher company valuations.
“Biotech used to be about making life a little better. Now it’s often about saving it. People will pay anything for that. That makes the opportunity set so much larger,” he said.
While Christian noted managers must be analyzed individually, he said he generally “feels good” about risk management by biotech hedge funds and “not nervous” about hedge funds having too much risk should the market correct.
Investors seem to agree, adding about $1.4 billion in net new capital to health-care hedge funds over the last three years, according to eVestment, which tracks hedge fund assets and performance. Such funds managed $25.46 billion as of March 31, slightly less than their peak in the third quarter of 2007 ($27.15 billion).
New funds are also launching at least in part to take advantage of the biotech opportunity. Firms that recently began trading or are about to include Orchard View Capital Advisors and Goldwater Asset Management from SAC Capital Management alums Eric Evans and William Hoh, respectively, and Ikarian Capital from Neil Shahrestani of Pura Vida Investments.
The biotech stocks held by the most hedge funds are Gilead, Celgene, Biogen, Amgen and Alexion Pharmaceuticals, according to public data as of March 31 compiled by Symmetric, which analyzes and compares hedge funds based on such filings.
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