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Exclusive-Big hedge funds call on doctors, scientists for an edge on pharma, sources say
By Nell Mackenzie - 12/3/2024
By Nell Mackenzie
LONDON (Reuters) - Some of the world's largest hedge funds are hiring doctors, scientists and analysts to give them expert insight into the prospects for pharmaceutical stocks after big share swings in the sector, eight sources told Reuters.
This year has seen sharp stock moves as companies report financial results and update investors on early and mid-stage drug studies.
Abbvie shares opened 11% lower on Nov. 11 after the company announced its mid-stage schizophrenia drug trials had failed. The same day, rival Bristol Myers Squibb shares rose almost 13% in pre-market trade.
Shares of Novo Nordisk, one of Europe's biggest listed companies, surged more than 7% in one day following November third-quarter guidance including better-than-expected sales of its popular Wegovy weight-loss drug.
Hedge funds, known for splashing out to gain a technological or research-based edge on market trends, are paying attention. Some of the biggest multi-strategy hedge funds are now looking to hire doctors and medical scientists globally and in Europe, said two people with knowledge of the firms' mandate for recruitment that has kicked off in the past six months.
These include Balyasny, D.E. Shaw, Point72, Schonfeld, Qube and Squarepoint, together overseeing more than $200 billion in assets, the sources said. All the funds declined to comment. Hedge funds employ such experts in research departments to provide insights on company growth prospects, including any early-stage drug trials ultimately gaining regulatory approval, said another recruiter and two investors.
All spoke on condition of anonymity because the details are private.
Multi-strategy hedge funds, which are among the largest in the industry, pursue diverse investment approaches under the same roof.
Some use independent teams called "pods", within which researchers work as part of a team led by a portfolio manager. Other multi-strategy funds have more collaborative structures, employing analysts with scientific and medical backgrounds as resident experts.
MEDICAL ASSISTANCE
In the past, hedge funds have hired scientists with specialist knowledge such as geology or engineering to inform commodities trading, said two sources with knowledge of how the funds work.
Weather engineers and meteorologists are regularly hired by the biggest to monitor fluctuations in the weather to inform trading in the power market.
Research and development in the pharmaceutical industry is expected to expand as borrowing costs in the wider economy begin to drop.
"The prospect of falling rates has seen multi-strategy hedge funds ramp up their hiring in healthcare," Freddie Stacy, co-founder of recruitment firm Sheridan Executive, said.
"It has in the past been a massive space in the States, but for the first time we're seeing a fresh interest in European healthcare personnel."
Hedge fund hiring of healthcare professionals and scientists particularly ramped up in the U.S. after the COVID-19 vaccine approval process, he said.
The trend had spread to Europe in the last six months and intensified alongside advancements in the ability of?artificial intelligence to make connections and discoveries in pharmaceuticals, Stacy added.
He could not go into further detail on the number of medical professionals and scientists he had placed at hedge funds, as the placements are private. European companies have seen near record-high volatility on earnings days this year, up almost a fifth from eight years ago, a recent Reuters analysis showed. Experts singled out multi-strategy hedge funds as one of the drivers of the phenomenon.
The funds have posted an 8.5% return in 2024 to the end of October, beating the wider industry which has returned 7.6% in the same period, according to hedge fund research firm PivotalPath. Culturally, doctors might match with hedge funds, said Stacy. "Ex-doctors are attractive because if you can deal with the kind of extreme trauma seen daily by the medical profession, you can certainly handle draw-downs on a trading floor," he said.
"Hedge funds want people with grit and determination? - and even a little humility."
(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe, Elisa Martinuzzi and Jan Harvey)