R GLOBAL HEALTHCARE EQUITY LONG/SHORT. OUTSTANDING PERFORMANCE IN A COMPLEX MARKET. S U P E R V I S E D B Y T H E S W E D I S H F I N A N C I A L S U P E R V I S O R Y A U T H O R I T Y . N O : 0 3 5 2 2 1
R ESSENTIAL INFORMATION CONTENTS Diversified long short in global healthcare AUM: EUR491m, USD542m 4 Scientific advisory …………………………………………… Launch: Jun 2009 Total Return: +302% 5 Investment process …………………………………………. Ann. Return: +25% net since inception Portfolio construction ……………………………………….. 6 Instruments: Equity, equity derivatives and indices. Risk management …………………………………………… 7 No of core 50-80 in a universe of 500 positions: 58 on average for Q3 2015 Performance …………………………………………………. 8 Historical Av. Min Max Fund facts ……………………………………………………. 9 Gross 156% 52% 218% Net 120% 37% 153% Appendices ………………………………………………… ... 10 Long 138% 44% 176% -18% -5% -43% Healthcare in context ……………………………………….. 16 Short Data bank……………………………………………………… 22 All information based on data from the Administrator, 2 SEB as of end Oct 2015 unless otherwise stated
R SUMMARY Over 20 years managing successful healthcare funds. • • World renowned industry professionals each with over 30 years experience, actively involved through the Scientific Advisory Board. Unquestionable alpha generation, outperforming all • relevant indices and top quartile in all relevant rankings. • Long term investment horizon: • Diversified across subsectors, company size and geographies to lower volatility. Active trading around holdings. • Predominantly cash flow positive companies. • • Typically investing post approval, mitigating event risk. 3
R OUTSTANDING SPECIALIST KNOWLEDGE PROF. STEN NILSSON • Chairman • 30+ years in healthcare Both Scientific Advisory Board (SAB) and • Professor of Oncology – Rhenman & Partners Asset Management Pathology HENRIK RHENMAN PROF. HANS WIGZELL • Was MD of Radiumhemmet (RPAM) members meet quarterly to review • CIO • Chairman products, projects and companies and • 20+ years in portfolio • 40+ years in healthcare provide valuable feedback • Professor of Immunology management investing in healthcare • Was Chairman of Nobel • Founded and acted as CIO Committee for Medicine PROF. BERTIL HÅLLSTEN • Quarterly meetings and continuous at Carnegie Healthcare and Physiology Funds • Expertise in infectious dialogue • Honorary Chairman disease control • 40+ years in healthcare • Royal College of Forestry • Enhanced knowledge of scientific • Managed SEB Pharmaceutical ELLINOR HULT Fund BIRGITTA STYMNE rationale, clinical trials, clinical usage, • Assistant portfolio manager products, companies and market trends GÖRANSSON • Research analyst • 8+ years Equity experience • 25+ years in healthcare • Key to assessing research and • Expertise in Biotechnology PROF. TOMAS OLSSON and Chemical Engineering developments in the healthcare sector • 30+ years in healthcare • Professor of Neurology • Properly weighing the investments with • Expert in autoimmunity and diseases in the nervous FREDRIK SWAHN informed feedback system • Member of the Nobel HÅKAN ÅSTRÖM • 30+ years in healthcare Assembly • MD Karolinska Institutet • Diverse expertise covering all sub- • 30+ years in healthcare • Expertise in surgery, clinical sectors of healthcare • Expertise in the services, intervention and pharmaceutical industry technology. PROF. PETER ARNER • Access to the latest academic and • 30+ years in healthcare institutional research projects • Professor of Medicine • Expert in metabolism, endocrinology and internal medicine Rhenman & Partners Scientific Advisory Rhenman & Partners board members Asset Management Asset Management investment team external board members 4
R INVESTMENT PROCESS • Assessment by the Scientific Advisory Board (SAB) with diverse and established expertise in the sector Clear understanding of the sub-sectors and their dynamics • Focus on innovative and fast growing companies • Current investment: • 06 increase/decrease/exit. • Typically invest after approval or participate and sell before event • New investment: typically 0.4% of portfolio. 06 Key to assess and properly weight • 04 proposed investments. Approx.80 companies/200 projects • 05 discussed a year. DECISION MAKING • Narrowed down to around 30 companies. 02 • CIO review with an excellent understanding 04 INVESTMENT of the sector and its dynamics. Select c.15 companies to present quarterly • RECOMMENDATIONS to SAB. 03 SCIENTIFIC ADVISORY BOARD MEETING 02 • Feedback from SAB on companies PACK FOR 05 discussed, invested or new. COMMITTEE • Yes/no/review at a later date. 01 • 1-3 companies with strong scientific SCREENING conviction. • Final selection by CIO. RESEARCH • Detailed pack with c.20 companies 03 Incremental decisions • sent to SAB two weeks in advance. based on risk management Both already invested and new • and position sizing. companies. • Typically 12-36 month investment horizon. • Sourcing companies from research 01 articles, SAB and investment banks. • Screening around 10% of the total market. Most companies are followed and visited • for more than 10 years. • 400-500 meetings annually. 5
R PORTFOLIO CONSTRUCTION Between 3% - 10% of NAV per position Typically 5% - 25% of the fund • The entire portfolio is made up of roughly 120-160 Roughly 2-10 positions positions, however the majority of positions are under 1% HIGH of NAV CONVICTION • October 2015: Size No of positions % of Fund High conviction 3.0% - 10.0% 4 15% Between 1% - 3% of NAV per position Typically 30% - 60% of the fund Core holdings 1.0% - 3.0% 52 93% Roughly 40-60 positions Fractional positions 0.5% - 1.0% 42 31% CORE HOLDINGS Candidate holdings 0.0% - 0.5% 37 12% There were a total of 135 equity positions with 79 positions under 1% of NAV (2 ETFs not included) Between 0.5% - 1% of NAV per position Companies can move up and down the pyramid and may • FRACTIONAL POSITIONS Typically 20% - 40% of the fund never reach the summit Roughly 50-70 positions Core and high High risk/high Safe harbour conviction positions reward positions, during times of on their way in and often with binary volatility and out of the portfolio outcomes unsure outcomes To become a fractional, core or high conviction position the company is typically reviewed by the Scientific Advisory Board Less than 0.5% of NAV per position Typically no more than 15% of the fund CANDIDATE HOLDINGS Roughly 50 positions Small positions that help the PM focus on the stocks’ developments All information based on data from the Administrator, SEB as of end October 2015 unless otherwise stated 6
R RISK MANAGEMENT Portfolio reviewed daily by three parties: The Portfolio Management Team looking at total exposure and at company specific • news, and by SEB Fund Services S.A as AIFM and Skandinaviska Enskilda Banken AB (publ) as creditor. Diversified portfolio (c.150 holdings). • Invests to be equally invested over time across the four subsectors (Pharma, Biotech, Medtech and Services) as well as in • small, medium and large market cap. Position size will rarely exceed 10% of portfolio and is often 2-5% for large cap and 1-3% for small to medium cap. • • Sizing of individual positions is designed to protect the downside and not affect the total NAV (on fund level) more than -1% due to company specific events. VaR target max 3% per day (95% confidence level). • • Formal risk review triggered after -6% NAV in a single month. 95% of positions can be liquidated within 7 days assuming a maximum 20-25% participation in average daily trading volumes. • 7
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