Professors help hedge fund pick winners

Sweden’s Rhenman Healthcare Equity has delivered an average annual return of 21% since it started in 2009

If you’re investing in health care stocks, you’d better ask the experts. Thanks to the advice from a range of professors, Swedish hedge fund Rhenman Healthcare Equity has delivered an average annual return of 21 per cent since it started in 2009. Asking clinical expertise before investing in complex products is a must for Henrik Rhenman, who manages the €460 million ($500 million; Dh1.83 billion) fund.

“We make money, sooner or later, on most of the recommendations from the Scientific Advisory Board,” Rhenman, chief investment officer at Rhenman & Partners Asset Management AB, said on Friday. “The advice is most important within biotech and pharma but medtech is getting more important for the scientific board.”

Nobel Prize judge

The Stockholm-based fund meets with an advisory board of five medical experts once a quarter which includes Tomas Olsson, a professor in neurology and a member of the Nobel Assembly at Karolinska Institutet, which awards the Nobel Prize in Physiology or Medicine. Rhenman & Partners’ chairman, Hans Wigzell, is a professor in immunology and the former vice-chancellor at Karolinska.

Investors in health care are seeking to profit from the global trends of an ageing population, innovation, and growing prosperity, especially in emerging markets. The MSCI World Health Care Index has increased about 14 per cent a year in the past five years but fears of tighter price regulation have subdued the market since 2015.

“I see a small risk for that,” Rhenman said. “This risk has always been present. The risk isn’t bigger than five years ago.”

The fund had a net long exposure of 130 per cent at end of February. Valuation of the health care sector is low relative to both the MSCI World Index and historically, according to Rhenman, who earlier managed health care funds at SEB AB and Carnegie Investment Bank AB.