It’s no secret that hedge funds have been underperforming the market by quite a wide margin in the last couple of years. However, in the industry that encompasses hundred of hedge funds and has gathered over $3.0 trillion in assets under management, there still are many players that posted great returns. This is particularly the case for some smaller funds, which are more nimble and can easier navigate around the market. Moreover, some sector-focused hedge funds that invested in high-performing sectors like healthcare or tech also enjoyed strong returns. This is the case of Jeffrey Jay and David Kroin‘s Great Point Partners, which invests only in the healthcare sector, and which saw great returns due to four of its top six holdings registered gains well above 100% last year.
Great Point Partners is Greenwich, Connecticut-based hedge fund that was co-founded by Dr. Jefferey Jay MD and David Kroin in 2003. Jeffrey Jay and David Kroin are currently managing directors at the firm, alongside Adam Dolder, Joseph Pesce, CPA, Noah Rhodes and Rohan Saikia. The fund invests both in private and public equity and has assets around $900 million.
We calculate a fund’s returns by taking into account its long positions in companies with a market cap above $1.0 billion as disclosed in quarterly 13F filings. This assessment of an investor’s performance is not entirely accurate, since it excludes short positions and investments that funds are not required to disclose. However, it allows us to see if the fund’s stock picks are worth following. We aggregate data from over 600 hedge funds that we track and identify the best stocks that the best-performing hedge funds collectively like using our proprietary methodology. The stock picks are part of our investment strategy and we share them in our premium quarterly newsletters. We also have a separate monthly newsletter, which looks into an activist fund each month and discusses best ways to imitate it.
Going back to Great Point Partners, based on our calculations, its stock picks returned 37.1% in the fourth quarter, which makes it the best performing fund among those we track. Moreover, a great fourth quarter puts Great Point’s 2017 returns at 69.3%.
In its latest 13F filing, Great Point disclosed an equity portfolio worth $586.07 million as of the end of December. While the equity portfolio is focused on the healthcare sector is highly diversified across companies, as the largest holding comprises just 7.50% of the equity portfolio value and there are a total of 37 positions excluding those in ‘Call’ and ‘Put’ options. The fund also doesn’t invest for the long run, with most positions having been initiated last year.
Having said that, let’s take a look at the best performing companies among the fund’s top picks and a couple of stocks that Great Point Partners added to its equity portfolio during the last three months of 2017.