Peter Kolchinsky‘s RA Capital Management recently filed its 13F with the SEC for the reporting period of June 30. Peter Kolchinsky started RA Capital Management after completing his Ph.D. in virology from Harvard in 2001. The fund was seeded by Vertex Pharma co-founder Rich Aldrich, who invested $4 million at its inception. Since then RA Capital Management has grown to about $1.8 billion in assets under management. The fund primarily invests in healthcare companies using an ‘evidence-based’ investing strategy. Apart from investing in publicly-traded companies, RA Capital Management also invests in private and early-stage healthcare companies. The latest 13F filing of the fund revealed that its U.S public equity portfolio at the end of June was worth $994.10 million. During the second quarter the fund had a turnover of 47.46% in its equity portfolio, having initiated a stake in 15 stocks and sold out of 13 stocks, among other moves. Although the fund had a stake in 58 companies at the end of June, its top three holdings accounted for over 26% of its equity portfolio. We’ll take a closer look at those three stocks in this article, which are Axovant Sciences Ltd(NYSE:AXON), Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), and Dyax Corp. (NASDAQ:DYAX).
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 60 percentage points since the end of August 2012. These stocks returned a cumulative of 118% vs. 57.6% gain for the S&P 500 Index (read the details). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
RA Capital initiated a huge stake in Axovant Sciences Ltd (NYSE:AXON), purchasing 5.0 million shares of the company during its IPO. As of June 30, this stake was worth almost $102 million and represented RA Capital’s largest equity holding, accounting for 10.25% of its portfolio. Axovant Sciences Ltd (NYSE:AXON) is a subsidiary of Roivant Sciences, a holding company founded by another healthcare investor, Vivek Ramaswamy. Mr. Ramaswamy left Daniel Gold‘s hedge fund QVT Financial in May 2014 to start Roivant Sciences. Axovant Sciences Ltd (NYSE:AXON) was created as a subsidiary of Roivant Sciences in November 2014 and shortly thereafter it acquired an unapproved and abandoned Alzheimer’s drug from GlaxoSmithKline plc (ADR)(NYSE:GSK) for $5 million. During Axovant Sciences Ltd (NYSE:AXON)’s IPO, Roivant Sciences sold a 20% stake of the company and raised $315 million. Since its debut in the public markets, several analysts and industry experts have raised concerns about the $1 billion-plus valuation of Axovant Sciences Ltd (NYSE:AXON), arguing how a company with an old, unapproved drug which it bought for $5 million a few months ago and hasn’t invested a lot in since then, can trade at such a high valuation. The market seems to agree, as shares of Axovant have crashed by 60% in just two months, though the company’s market cap still stands at $1.16 billion. Apart from RA Capital Management, Jacob Gottlieb‘s Visium Asset Management also purchased 80,000 shares of Axovant Sciences Ltd (NYSE:AXON) during its IPO.