Fund Focus: Wainscott Capital Bullish On Biotech

Nov 24 2014 | 11:47am ET

While many hedge funds suffered losses in October’s rough markets, one fund bucked the trend: Wainscott Capital Partners, a global long/short equity hedge fund that focuses primarily on biotech and healthcare investing, gained 1.65% for the month.

“In the first half of October when the bottom fell out and some biotech funds were down 20%, we were down maybe 2%, and then we came back,” Thomas Gilbert, founder of New York-based Wainscott, told FINalternatives. The fund was also up in September, gaining 0.28% for the month. It ended October with YTD returns of 10.57%.

“The performance that we had in September and October really set us apart,” said Gilbert, a 40-year veteran of Wall Street. “People wanted to see how we performed in a bear market and that worked out brilliantly for us.”

Gilbert and his team, which includes two biotech PhDs, takes a conservative, diversified approach to running the fund, investing in around 40 long positions and 20 short positions at any given time. He says that, in addition to its deep bench of experts, what sets the fund apart from others in the space is its moderate risk profile.

“We’re not trying to beat all of the biotech funds, we’re basically trying to avoid drawdowns,” he said. Thus far it has paid off with the fund seeing its biggest drawdown (4%) earlier this year.

Gilbert says that one of the big challenges of investing in biotech is the volatility:

“People say, ‘this guy can be up 40% but then he can be down 40%.’ We would rather be up 20% and not have any down months or down years,” he said. “We’re not cowboys, we try not to have more than 10% exposure to any one name.”

While Gilbert enjoys shorting individual companies he deems to have ‘ridiculous’ valuations, as a whole he is bullish on the future of the biotech/healthcare industry.

“For the next 10 years we really have the wind at our back. There is a continually expanding universe of companies that are executing, and the reason they are executing is that there have been some major breakthroughs in science. There are new drugs out there and new treatments for diseases,” he said.

“It is staggering, the new therapies that are coming on the marketplace….you have a convergence of the interests of the FDA and the companies that are going to clinical trials. The FDA is seeing good stuff and fast tracking trials. [They are] aware of the huge progress of medical technology that is going on and it is just opening up as we speak.”

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