Published on July 2nd, 2021 by Nikolaos Sismanis
Perceptive Advisors is a New York-based hedge fund/micro VC, specializing in identifying opportunities and directing financial resources towards the most promising technologies in modern healthcare. The company is unique in that it holds public companies in its portfolio while also offering both debt and equity financing to smaller, private companies, as a VC fund. Perceptive Advisors was founded in 1999 and currently has around $13.4 billion worth of 13F assets under management.
Investors following the company’s 13F filings over the last 3 years (from mid-May 2018 through mid-May 2021) would have generated annualized total returns of 2.93%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 18.60% over the same time period.
Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.
Perceptive Advisors’ investment performance has a larger than normal amount of look-back bias as the type of healthcare companies it invests in are often acquired or fail.
You can download an Excel spreadsheet with metrics that matter of Perceptive Advisors’ current 13F equity holdings below:
Keep reading this article to learn more about Perceptive Advisors.
Table Of Contents
- Introduction & 13F Spreadsheet Download
- Perceptive Advisors’ Investment Philosophy
- Perceptive Advisors’ Investment Strategy
- Final thoughts
Perceptive Advisors’ Investment Philosophy
The fund’s investment philosophy revolves around being part of major healthcare breakthroughs. With the fund’s investment team primarily consisting of molecular biologists, MDs, and PhDs, Perceptive understands the massive potential and blockbuster impact of medical discoveries. By investing and helping to lead an idea from discovery to distribution, Perceptive strives to positively impact both the fund’s bottom line and society in general.
The company’s investment strategy is quite simple, divided into two segments: Life Sciences, and Credit Opportunities.
Over its lifetime, the fund has been allocating its funds in both public and private equities, whose operations involve developing biotechnology products, drugs, medical devices, and diagnostics. Perceptive invests throughout different stages of a company’s life cycle, in which its team believes it can add the most value in its journey.
The fund actively assists and advises companies from their early-stage investment rounds until their final stages towards an IPO. Its investment team has been historically using a fundamentally scientific approach to develop proprietary research, enabling Perceptive to make investments with conviction and achieve market-beating returns. Post-IPO, the fund may continue holding shares, or successfully exit its early investment in a company.
The second division of the fund’s total investment portfolio is Credit Opportunities since Perceptive launched its first closed-end fund in 2013. It now approximately holds $1 billion worth of capital committed to private credit, providing customized debt financing solutions to innovative healthcare companies. Perceptive seeks to lend anywhere from $10 to $100 million in both private-held and public companies, consisting of minimally dilutive capital.
Therefore, the fund can leverage its sector expertise to capture profitable debt opportunities by minimizing the risk in what would otherwise be an all-equity portfolio. Its due diligence process in a very niche and techno-scientific sector provides a unique advantage compared to mainstream hedge funds, which lack the talented scientists to identify such investments.
Public and Private Investments
While Perceptive’s sector-specific portfolio may not be industry-diversified, its funds are well-split between its public and private equities, as well as its credit offerings.
Public Investments: More than half of Perceptive’s total funds are allocated in public equities, currently valued at around $8 billion, spread across 74 individual investments. Despite the medical sector being a high-risk one, Perspective’s top two holdings make up 19.4% of the fund’s portfolio, showcasing some high-conviction picks. What’s important to note is that because the majority of its holdings are micro-cap stocks, Perceptive can hold a substantial stake in a company with a relatively humble investment. Despite the fund’s numerous holdings, the fund’s stake in a company may be anywhere between 5%-25%.
As a result, Perceptive’s team can have an active, influential role in the company’s operations, utilizing its expertise throughout its commercialization journey. By holding a substantial percentage of shares, Perceptive can get excited about a potential success and thus happy to allocate resources while reflecting on the underlying risks. This is quite a unique characteristic, as most funds hardly end up owning more than a single-digit stake in their public-equity holdings.
Source: 13F filings, Author
Private Investments: The fund’s private equity segment is equally significant, with Perceptive having participated in numerous funding rounds for more than 150 private companies. Its team’s expertise is well-reflected in the fund’s impressive success ratio, with 85 victorious exits.
Some of these include:
Relay Therapeutics (RLAY)
Relay Therapeutics is the creator of an allosteric drug-discovery platform designed to apply computational procedures to protein motion. Perceptive participated in the company’s $400 million C round back in 2018. In July of 2020, the company completed its IPO, with shares having almost doubled in just a couple of months. Perceptive has exited its stake in the company, booking a multi-bagger return.
Invitae Corporation (NVTA)
Invitae is a genetic information company whose purpose is to carry genetic information into routine medical practice to enhance the quality of healthcare for everyone. Perceptive took part in its series F round back in 2014, in an effort to raise $120 million. A year later the company successfully entered the public markets and has since become a leader in the field, boasting a $4.3 billion market cap. The fund exited its position in early 2020, marking another example of its team’s expertise to identify long-term winners, from early on.
Poseida Therapeutics (PSTX)
Poseida Therapeutics is a clinical-stage biopharmaceutical company devoted to leveraging its proprietary gene engineering platform technologies to design next-generation cell and gene therapeutics, with the potential to cure. Perceptive helped the company raise $142 million in its second-to-last C round. Poseida successfully IPOed in July 2020, in which time Perceptive successfully exited its position, before shares took the downturn.
Perceptive Advisors is a uniquely structured hedge fund specializing in assisting healthcare companies through different stages in their journey towards commercialization. By deploying its team’s extensive set of skills in the different niche sub-sectors, the fund has historically produced great returns, despite what seems like an under-performance over the past few years. The company’s numerous successful exits in its private investments are not reflected in public equity portfolio. Hence the fund’s actual returns are likely to be much more prosperous.
We encourage readers to understand the risks and perform their own due diligence before attempting to simulate some of Perceptive’s holdings, as its sector of operations holds various risks, and is highly volatile, and requires a deep understanding of the individual corresponding business models.