Magnetar Seeks $400 Million for Its First Health-Care Hedge Fund

(Bloomberg) -- Magnetar Capital, the alternative investment firm started by Alec Litowitz and Ross Laser, is set to launch its first health-care hedge fund next year, seizing on a strong sector for startups.

The firm is seeking about $400 million in the first close of fundraising by mid-2020, according to a person with knowledge of the matter. Portfolio manager Chris Procaccini, 43, who joined the firm in 2018, and a team of four analysts will take long and short positions on well-known stocks in businesses such as pharmaceuticals, medical devices and health-care services.

Even as hedge funds across the industry have been shuttering because of investor frustration with tepid returns and high fees, there’s been a surge in demand for specialists who can navigate the political volatility that often whipsaws health-care stocks. This year’s new funds include the $2 billion health-care and technology-focused Woodline Partners and the $750 million biotech-oriented Avidity Partners, both headed by former Citadel managers.

Unlike many health-care funds, Magnetar will avoid small biotechnology companies, whose shares can soar or plunge depending on the results of experimental drug trials, making them prime targets for high-stake bets. Instead, the fund will invest in 15 to 30 long holdings and 20 to 40 short positions among established companies, said people familiar, asking not to be identified because the information is private.

The $12.9 billion firm, which is based in Evanston, Illinois, has wagered on energy, infrastructure, alternative credit and fixed income since it was founded in 2005. But Magnetar is best known for its profitable trades on real estate more than a decade ago, before the U.S. housing bubble burst, when it bet that subprime debt would tumble.

Procaccini, previously a manager at Hutchin Hill Capital, Highbridge Capital Management and SAC Capital (now Point72 Asset Management), has tapped analysts with deep knowledge of drug industry behemoths like Johnson & Johnson, Merck & Co. and AbbVie Inc., one of the people said. The team includes Maxwell Carpenter and Alex Abularach.

Magnetar spokeswoman Lilly Martinez declined to comment.

©2019 Bloomberg L.P.

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