07/25/2012

OrbiMed Plans to Cap Hedge Fund Inflows

One of the industryís largest and most successful healthcare investors, OrbiMed Advisors, will bar entry to its hedge fund once it reaches $2 billion of net assets.

OrbiMedís Caduceus Capital vehicle currently has $1.8 billion under management. With a year-to-date gain of 20% through July 18 and a steady flow of subscriptions, the long/short equity fund is expected to reach the $2 billion mark in the fourth quarter. In the second quarter alone, the fundís assets grew by $300 million.

The New York firm has been managing its hedge fund program for two decades. Since its inception in January 1993, Caduceus has generated a 19% average annual return ó versus an 8.3% total return for the S&P 500. The fund primarily invests in the stocks of pharmaceutical and medical-device companies.

OrbiMed, led by managing partner Sam Islay, has never gated its hedge fund investors or resorted to side pockets for managing illiquid investments.

The firm runs $6.2 billion overall, the bulk of it in long-only and private equity funds. OrbiMed has a team of 50-plus investment professionals in five offices, including a good number who hold medical degrees or doctorates in the life sciences.

The firm invests globally, scouring a universe of more than 2,000 publicly traded healthcare companies and more than 1,500 private companies. In April, OrbiMed launched a $222 million venture capital fund to invest in healthcare startups in Israel. The vehicle is backed by the Israeli government. Later this year, the firm plans to launch a second Asia-focused buyout fund. The first vehicle in the series, OrbiMed Asia Partners 1, began investing in 2009 with $200 million of equity.

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