One of the longest-tenured hedge fund managers has launched a new product.
Kingdon Capital Management has raised more than $30 million for Kingdon Healthcare Fund, which officially started up September 1, according to a client letter signed by firm founder Mark Kingdon and obtained by Institutional Investor.
Mark Kingdon will manage the new fund with Brian Klein as the primary healthcare analyst, according to the letter. The vehicle will “closely track” the strategy of the firm’s flagship fund and invest in both public equities and private opportunities. Klein has more than 13 years of experience investing in healthcare, principally in pharma and biotech, according to Kingdon, who added the pair has worked closely for the past three years.
“Given the extraordinary opportunity set we currently see in small and medium-sized companies, and the virtue of strongly focusing the portfolio in our best long-term reward/risk situations, the fund’s performance is likely to be quite volatile,” Kingdon warned investors in the letter. “Short-term traders, quants, and aggressive managers create price volatility which often provide opportunities for patient, high conviction investing. We are confident that our approach, focus, and expertise position us to take advantage of the compelling investment opportunities that we see in healthcare as the accelerating pace of innovation and evolving governmental involvement impact every facet of the space.”
Kingdon noted in the letter that since September 2017, its healthcare strategy has compounded at a 24 percent net annualized rate of return “with significant alpha generation [from its] long, short, and in private investments.”
At the end of June, the firm’s two largest U.S. common stock positions were biopharmaceutical companies — Biohaven Pharmaceutical and Athenex — according to its most recent quarterly 13F filing with regulators.
Kingdon Capital, founded in 1983, declined to comment.
The firm’s assets under management peaked at $7 billion in 2007, a year before the global financial crisis. As of January 1, 2020, it managed less than $1 billion: $770 million on a discretionary basis and $170 million on a non-discretionary basis, per its latest ADV filing with regulators.
Its flagship long-short fund M. Kingdon Offshore Fund has compounded at 12.4 percent per year since its 1986 inception, according to HSBC. The fund was down 7.34 percent this year through September 4 after gaining 14.5 percent last year, according to the hedge fund database. In 2018 Kingdon finished the year down 12.2 percent.
In late 2018 Kingdon told clients several key people would be leaving the firm: chief investment officer Michael Mackey, credit head Michael Pohly, and consumer business lead Patricia O’Donald, according to a Bloomberg report at the time, which cited a client letter.
Kingdon also said at the time that it was winding down its credit fund.