WBB enters buy-side with new healthcare long/short strategy

WBB Securities, a US financial services firm and boutique investment bank since 2001, has a long history within the biotech industry. Managing partner Steve Brozak has been associated with biotech for the last 25-30 years, and was involved with some of the most notable IPOs in the industry, such as Celgene. So launching a healthcare strategy out of their new asset management division (launched in September 16) was a logical step.

The strategy will focus on small caps (sub-$2 billion). Of the roughly 600 US-domiciled healthcare companies, about 80% are small-cap with little Street coverage.

"The investment opportunity set is mostly smaller, US-domiciled companies within the biotech industry, but also smaller pharmaceutical and medical device companies as well," managing director John Nolan told Opalesque. Nolan, who most recently served as vice president and co-head of quantitative investment research for manager selection at JPMorgan Chase, co-manages the fund with Brozak.

The strategy, which was launched on 3rd February, also applies a long/short and concentrated strategy, with about 20 positions.

It is concentrated because the managers want each position to individually have meaningful contribution to alpha. Funds that are too diversified, according to Nolan, start to resemble an index, "and just based on a tracking error, or a relative volatility profile, it becomes very difficult to actually outperform the market."

"We look at where our alpha is coming from," he continues. "Is our alpha relative to a particular benchmark coming from 'factor' or 'style' exposures, or is it coming from idiosyncratic sources? I don't want our outperformance to come from factor or style exposures. I want our outperformance to come from idiosyncratic sources that are independent of that, and which truly leverage the fundamen......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.