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Building a business around Healthcare: A closer look at today’s hottest hedge funds

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The performance of healthcare stocks is heading upwards. Right now, this is where investments are pouring in. In an article from Hedgeweek, Abbvie and Actavis, last quarter, lead the healthcare group on the top hedge funds buying list along with Energy and Technology companies.

Investors are always looking for their next big investment theme. And where the market points now is healthcare, technology, and energy. 

With the globalization of economies and rapid growth of each industry, crossbreed markets are emerging.  According to Richard Kimball Jr., former Managing Director at Morgan Stanley and now co-founder and CEO of HEXL, a healthcare technology company in the U.S., investing in healthcare and technology is strategic. “The healthcare industry is beginning a major transformation which is creating both the need for new innovations as well as attractive investment opportunities.  It’s exciting to pursue attractive investment while also contributing to these important issues for our society.”

Pavle Sabic, Financial Risk Manager at S&P (Standard & Poor’s) Capital IQ, said in the hedgeweek article, “hedge funds are among the most sophisticated institutional investors in the world. By analysing their behaviour in this manner, we’re able to provide valuable insight for investors who want to know where the ‘smart money’ is investing.” 

Healthcare technology is now the investment sector’s hottest asset. New companies keep coming in the market, existing ones are exponentially growing, stock are at the top buys page, and the list goes on. 

In a report from ValueWalk, healthcare tech investment firm, EcoR1 Capital, was one of the top gainers among the small and mid-sized funds last year. With the 62.2% jump until the end of November, the new star of the industry, which was just launched last year, now manages $206 million worth of investments. One of EcoR1’s investors is the famous hedge fund Greenlight Masters.

The hedge fund business continues to experience significant capital inflows but the focus of where that capital goes is always shifting. In second quarter and fourth quarter reports from S&P, there was a shift from industrials, telecom, and utilities sectors to healthcare, information technology and financials. These industries are now leading the hedge fund investments which in turn can drive gains in the underlying equities in these industries.

Hedge fudge investment is all about intelligent risks and utilization of data trends. Jack Inglis, CEO of the Alternative Investment Management Association (AIMA) said in an article from Forbes.com that, “sophisticated investors do not look at their hedge fund investments as a means to beat the S&P 500. They recognize that the equities boom may not last forever and they want capital preservation, reduced volatility, heightened diversification and strong risk-adjusted returns.”

Moreover, Phil Orlando, chief equity strategist at Federated Investors said in an interview with CNN Money, that healthcare stocks in general have lower investment risk compared to other sectors. “Health care stocks offer good growth potential but also the safety of dividends.” 

At the end, investors look at the long-term industry trends. And with the constant innovation in the healthcare sector, it is unlikely that the industry will significantly slow down anytime soon.

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