Some shine in Augusts´downbeat Healthcare Sector

Stockholm (HedgeNordic) Broad equity indices shed blood during the month of August, MSCI World loosing 6,6% for the month, most fingers pointing East to China when looking for explanations and reasoning. Also the hedge fund space largely could not escape the sharp price moves. Credit Suisse AllHedge Fund Index withdrew by 2,2%, brining it into negative territory for the year and also the Nordic Hedge Index (NHX) gave up 1,7% (+2,6 YTD) ranking August among the worst five months since inception of the NHX in January 2005.

Among the sectors that was hit hardest was healthcare where the venesection was a whopping 7,3% for the MSCI Healthcare Index, even underperforming the poor performing broader equity markets. Such volatile environments of course are an ideal playing ground for stock pickers having the possibility to have conviction trades both on their long and short books.

Sector Healthcare Fund with its market neutral approach managed to extract a net return of 4% during the month in these difficult conditions, nearly doubling the yearly return to 7,6%. This represents the second largest monthly gain for the fund, which is completing its 10th year of track record this September. In comparison, the average winning month for the fund (66%positive months) is 1,4%.

„Our portfolio once again benefited from its contrarian valuation focused style during this volatile month. The core contributor on an absolute basis was our short book”, the funds portfolio manager Trond Horneland tells HedgeNordic. „On a sub-sector level performance was broad based with only our generic book having a marginal negative contribution. Our pharmaceutical book had the strongest return delivering positive alpha from both its short and long bets.“

In their monthly letter to investors for August the portfolio managers disclosed individual picks that contributed to the performance. “On an individual stock basis the key positive contributors were our long bet in Lundbeck and our short bets in Novo Nordisk and Novartis. These gains were only partially offset by losses from our long bets in Sanofi, Bristol-Myers and Johnson & Johnson.“

The Norwegian managers long only fund Sector Healthcare Value Fund retreated by 3% in August and is up by 13,7%YTD while MSCI Healthcare Index is holding on to a gain of 6,2% for the year after the correction in August.

Rhenman Healthcare Equity L/S  fund, the only other Nordic manager active in the health care space gave up almost 11% of NAV in August but still holds on to a 20% appreciation for 2015, making it one of the top performing funds in the entire Nordic hedge fund universe year to date.

In their monthly letter, Rhenman & Partners conitues their positive outlook for the industry: “August was a grim month for the Fund and the underlying holdings. Apart from the above-mentioned, subjects for rejoicing were few; most holdings were down. The end result of the decline, however, was that many healthcare stocks are now heavily oversold and have significantly low valuations in relation to their earnings multiples, especially if one looks ahead to 2016’s earnings estimates. It is reasonable to do so, since in the next three months the majority of analysts will start updating earnings estimates and also set new target prices based on 2016’s profits.“

 

Bild: (c) Sergey-Nivens—shutterstock.com

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Kamran has been working in the financial industry since 1994 and has specialized on client relations and marketing. Having worked with retail clients in asset management and brokerage the first ten years of his career for major European banks, he joined a CTA / Managed Futures fund with 1,5 Billion USD under management where he was responsible for sales, client relations and operations in the BeNeLux and Nordic countries. Kamran joined a multi-family office managing their own fund of hedgefunds with 400 million USD AuM in 2009. Kamran has worked and lived in Vienna, Frankfurt, Amsterdam and Stockholm. Born in 1974, Kamran today again lives in Vienna, Austria.

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