QVT Financial’s Investments, Performance, Letters

Daniel Gold, who holds a Bachelor of Arts degree in Physics from Harvard College, founded QVT Financial in 2004 after having worked for several years as a star trader at Deutsche Bank. QVT started inside Deutsche Bank and over the years its team has developed several fundamental and quantitatively-oriented strategies, which use the fund’s own, internally-developed software.

QVT is a highly-diversified fund with offices in the US, Europe and India, which invests in a variety of securities, including debt, and over the years has been involved in a number of companies, some of which it took to court. For example, in 2009, QVT led a group of bondholders to explore their options regarding the delayed debt payments of Nakheel, a real estate company owned by Dubai World. In 2007, QVT joined six other hedge funds to urge Refco Inc. to increase its payments to stockholders during its bankruptcy proceedings. In 2008, it accused the Italian bank UniCredit of disregarding shareholder rights in the takeover of Kazakh bank ATF, of which QVT held around 10% preference shares, which were tendered at a lower price than ordinary shares. Earlier this year, QVT Financial has opened a bankruptcy court trial against Lehman Brothers Holdings Inc. to collect a $265 million claim over its credit default swap transactions with Lehman.

In this way, Dan Gold’s fund was involved in a lot of restructurings in various companies over the years. QVT even had a relationship with Turkish football (it’s football, not soccer). QVT was the largest minor shareholder of Galatasaray Sportif, the listed merchandising of the renown Turkish football club, Galatasaray, and in 2010 it appealed to the country’s financial markets watchdog, the Capital Markets Board, to intervene in the merger between Sportif and the club itself, accusing it of using a tender offer for Sportiff to avoid repaying around $223 million in loans that the subsidiary offered to the parent company. QVT also sued the CMB, claiming that it failed to protect shareholders in the merger after the authority allowed the merger to go through. The fund held almost 18% of Sportif and said that the proposed merger at around $101 per share undervalued the company by as much as 75%. Nevertheless, Gold said that QVT’s position in Sportif, which it had held since 2005 generated a profit even at the proposed tender price.

Aside from suing companies and getting involved in restructurings, QVT Financial has also been involved in the creation of several companies, the most well-known of which are Axovant and Myovant. In 2014, Vivek Ramaswamy, a partner at QVT Financial, launched Roivant Sciences, a holding company that in-licenses late-stage drug candidates and uses its subsidiaries to develop them. QVT Financial, where Ramaswamy was responsible of managing the biotech portfolio, backed Roivant, which later went on to launch several other companies, the largest of which are Axovant Sciences Ltd (NYSE:AXON) and Myovant Sciences Ltd (NYSE:MYOV). Axovant and Myovant are currently QVT’s largest holdings, according to its latest 13F filing, although it owns the shares indirectly through Roivant.

QVT Financial is one of approximately 650 hedge funds that we track at Insider Monkey as part of our investment strategy (see more details). Moreover, it is one of the most successful funds we track. According to our calculations, which take into account the fund’s investments in companies worth over $1.0 billion disclosed in its 13F filings, QVT Financial was the top performing hedge fund in our database with a return of 38.1% during the first quarter. The fund also returned 17.5% in the first quarter and was 62.2% in the green in the first six months of 2017. This shows that QVT Financial is a fund whose investments are worth following and even imitating in order to generate market-beating returns. On our website, you can track QVT’s real-time filings with the Securities and Exchange Commission, in which the fund reveals a new position, or reports changes to an existing holding and other developments, as well as you can see the fund’s equity portfolio as soon as it files its quarterly 13F filings. To do that, you should sign up on Insider Monkey and add QVT to your follow list.

In its latest 13F filing, Dan Gold’s fund disclosed an equity portfolio worth $3.75 billion as of the end of June, up from $3.22 billion a quarter earlier. The portfolio was mainly invested in the healthcare sector, which amassed over 80%, mainly due to two large positions in Axovant and Myovant. On the next pages, we are going to take a closer look at some of QVT Financial’s top holdings heading into the third quarter.

1. Axovant Sciences Ltd (NYSE:AXON)

In Axovant Sciences Ltd (NYSE:AXON), QVT disclosed holding a $1.74 billion position that contains 75 million shares. The stake represents almost 76% of the company’s outstanding stock and the fund doesn’t own the shares directly, but via Roivant Sciences. Axovant Sciences Ltd (NYSE:AXON), a clinical-stage biotechnology company that focuses on developing therapeutics for the treatment of dementia, including Alzheimer’s disease, went public in June 2015 in a stellar IPO that almost doubled the value of its stock on the first day. However, since the IPO, the stock has lost around 10%. In April, the stock registered a jump on the back of the announcement that David Hung, former CEO of Medivation, would become the company’s CEO. Overall, the stock has advanced by over 60% since the beginning of 2017. Andreas Halvorsen’s Viking Global is also a shareholder of Axovant Sciences through its stake in Roivant Sciences acquired in 2015.

2. Myovant Sciences Ltd (NYSE:MYOV)

Myovant Sciences Ltd (NYSE:MYOV) is another subsidiary of Roivant Sciences, which was formed in partnership with Takeda Pharmaceuticals. QVT is deemed to own 37.23 million shares of Myovant worth $435.61 million through its interests in Roivant. Myovant Sciences Ltd (NYSE:MYOV) was floated in October 2016 and its stock has inched up by around 4% since the IPO. Similar to the previous year’s Axovant Sciences Ltd (NYSE:AXON) IPO, Myovant Sciences Ltd (NYSE:MYOV) was the largest biotech public offering of 2016. Myovant Sciences is also a late-stage biotechnology company engaged in developing therapies for women’s health and prostate cancer. The company’s main drug is relugolix, which can be used in treatment of uterine fibroids and prostate cancer. The drug is currently in its Phase 3 trials, expected to be completed within the next year.

3. MakeMyTrip Limited (NASDAQ:MMYT)

QVT Financial increased its stake in MakeMyTrip Limited (NASDAQ:MMYT) by 10% during the second quarter and reported holding 2.26 million shares valued at $73.55 million in its latest 13F filing. The stock of MakeMyTrip Limited (NASDAQ:MMYT), an India-based online travel company, has surged by over 68% over the last 12 months, as the company reported substantial revenue growth for the past several quarters. For the second quarter, MakeMyTrip Limited (NASDAQ:MMYT) posted a net loss of $0.73 per share, lower than the expected loss of $0.50, while its revenue of $192.96 million grew by 58.4% on the year and was $84.31 million higher than expected. Two other investors bullish on MakeMyTrip Limited (NASDAQ:MMYT) are James H. Litinsky’s JHL Capital Group and George Soros’ Soros Fund Management, which own 1.66 million shares and 1.47 million shares, respectively.

4. Arbutus Biopharma Corp (NASDAQ:ABUS)

In Arbutus Biopharma Corp (NASDAQ:ABUS), QVT Financial holds 16.01 million shares worth $57.65 million, also through Roivant Sciences. Arbutus Biopharma Corp (NASDAQ:ABUS) is a micro-cap biotech company that is engaged in developing Hepatitis B drugs. The company was formed in 2015 through the merger of Tekmira Pharmaceuticals and OnCore Biopharma. The company’s stock has climbed by over 70% since the beginning of the year, on better-than-expected results for the first two quarters. There were seven funds tracked by Insider Monkey long Arbutus Biopharma Corp (NASDAQ:ABUS) at the end of June.

5. New York Times Co (NYSE:NYT)

QVT Financial cut its stake in New York Times Co (NYSE:NYT) by 20% between April and June. In this way, the fund held 1.47 million shares worth $26.01 million heading into the third quarter. The stock of the media company has appreciated by 39% year-to-date, amid the company beating the consensus estimates in the last three quarters. Earlier this year, New York Times Co (NYSE:NYT) announced its 2020 report, in which it outlined its vision to adapt to the increasing demand for digital reporting. The company plans to reduce costs and in May it started a round of buyouts of its editing staff and said it planned to acquire additional reporters. In June, New York Times Co (NYSE:NYT) staffers staged a walkout to protest the job cuts among editors. During the second quarter, the number of funds from our database long New York Times Co (NYSE:NYT) inched up by two to 18.

Disclosure: none