“At a time when the investment environment seems so uncertain in the short term, savvy investors know that the health care sector generally, and the biotech and therapeutics sub-sectors in particular, have tremendous potential for long-term growth,” declares Optima founder, Dixon Boardman, who also has personal experience of investing in health care stocks over the past 40 years. “Health care is the fastest growing area of the economy,” he continues, “and the FDA has become more accommodative in passing new drugs. There are also opportunities on the short side, and some managers have been active on both the long and short side as binary drug trials generate huge volatility. Over the past decade, the managers underlying our multi-manager strategy have consistently outperformed the S&P 500. We have identified five of them; often they employ doctors and PhDs to obtain extra insight.”
Health care is a big sector, very close to technology and financials in the S&P 500 weightings, but Boardman prefers smaller managers running between $500m and $3bn, who can capitalise on opportunities in small caps – and sometimes even microcaps – where the economics can sometimes be akin to venture capital: nine firms may fail while one produces spectacular returns. The selected managers also have some scope for investing in pre-IPOs, up to a maximum of 10%.
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