If there is one biotech-dedicated fund that any healthcare investor would love to try for a seat, it would be Baker Brothers.
Despite their unparalleled reputation, track record, and marquee status, Baker brothers does not even have a website and tries to remain under the radar. It is rumored that they have fewer than 20 investment professionals- don’t let the number of investment professionals fool you – they happen to have over $20bn of asset under management that is extremely concentrated. At the same time, they are well-known for investing in the most innovative therapeutics companies with a macro point of view and a very very LONG term horizon. It is no surprise that every company wants to count Baker Brothers as its pre-IPO investors because of the positive read-through to other investors.
Above is the latest stock holding filing from Baker Brothers – their single largest position is Seattle Genetics (SGEN) and has market value of $8bn dollars. This takes up 36% of the total holdings. The next largest position is Incyte (INCY) with $3bn+ stake.
Two largest holdings happen to be two companies that are considered to be among the most innovative developers of oncology drugs in the world.
Baker Brothers also participate in developing long-term strategic vision and decision making process sometimes directly through a board seat, and have reputation as an investor that backs management team’s long-term-vision.
Because they invest for long-term, many biotech investors always pay attention to key changes in Baker Brother’s stock holdings every quarter. Baker Brothers also do not change their positions often, and many investors mirror their position for the same reason.
The dream way of investing is the Baker Brothers way – they have a macro picture in mind and continue to support strong management team through venture investing or participating in private rounds when the companies are public and also participate in follow-on equity following when the companies are public.
Seattle Genetics/Seagen is a case in point. Baker Brothers believed in the vision of SGEN founder Clay Seagall that antibody-drug conjugate will play a major role in oncology therapeutics (probably more of a bet on targeted and precision therapy), and have been steadfast supporter for over 15 years. Felix Baker is also contribute to the long-term vision of Seagen as a board member as well.
Baker Brothers are also different from other hedge funds in that Baker Brothers does not seek short-term gain – their reputation for respecting and supporting management team’s vision for the long-term particularly makes them an attractive investor for early stage biotechs with promising science.
I really believe in the value of long-term investing. However, many funds structurally do not provide an environment where long-term investing is respected. The reality is that unless you have a pristine track record like Baker Brothers, your investors will pull money out of your fund if you lag others for a few months.
However, a handful of funds are generating enormous returns based on long-term track record. In my view, if you are investing in biotech, it really does not hurt to check out Baker Brother’s latest holdings and try to decipher the future that Baker Brothers are looking to profit from in 5-10 years.
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