Healthcare-Focused Hedge Funds and the Changes Occurring within the Healthcare Sector - March 2014

by Sasha Pickup

  • 27 Mar 2014
  • HF

Preqin’s Hedge Fund Analyst currently tracks 562 hedge funds with exposure to the healthcare sector, which account for $91.2bn in aggregate assets under management. According to Preqin data, these hedge funds achieved average returns of 18.63% last year, comfortably outperforming their hedge fund peers, and 2013 represented the best year for healthcare funds since 2009. 

In particular, hedge funds which have a focus on the US healthcare sector performed strongly in 2013 with average returns of 23.31%, far exceeding the overall Preqin hedge fund benchmark of 11.17%. The Affordable Care Act, or ‘Obamacare’ as it is widely known, is likely to be the prime reason for the rise in US healthcare industry stocks as a whole. The passing of the Affordable Care Act has led to the anticipation that the reforms could impact on the profits, and hence the stock price of many healthcare firms. This is based on the view that an increased proportion of the US population, estimated to be between 30 and 40 million, will enter the health insurance market. 

Outside of the US, the healthcare sector has also presented good opportunities for managers during 2013. Many managers benefitted by taking advantage of aging populations and therefore rising healthcare needs, especially in European countries. Hedge funds with exposure to European healthcare stocks also performed favourably with average returns of 17.65% in 2013. 

Preqin data shows that 21 hedge funds with exposure to the healthcare sector generated returns of more than 50% during 2013. Bulle Rock Partners Fund managed by Bulle Rock Capital achieved impressive yearly returns of 124.15%. The fund significantly outstripped not only the hedge fund benchmark but also its peers with a focus on the US healthcare sector. 

There is no doubt that the healthcare industry will continue to be a strong sector in the global economy over the coming years. In regards to the US healthcare industry, Obama’s reforms have been met with mixed reactions with concerns as to whether the reform is having some unintended consequences on the economy as a whole. Therefore, it is difficult to predict what will happen during 2014. However, early indications suggest it could be another successful year for healthcare-focused hedge funds, with these funds having 2014 year-to-date returns of 2.98% in comparison to 1.48% for all hedge funds. 

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