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Perella Weinberg shuts health care funds as others cash in

Friday, 6 Sep 2013 | 3:39 PM ET
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Perella Weinberg Partners has shut a health care investment strategy following years of tepid returns—even as other hedge funds in the sector have recently notched big gains.

The Perella Weinberg Partners Tōkum Fund, a hedge fund that invested in the stocks of medical and pharmaceutical companies, is being liquidated, according to two people familiar with the situation. The $10.1 billion New York-based hedge and private equity fund manager is also killing the related European public vehicle it had set up in partnership with Morgan Stanley, the MS Perella Weinberg Partners Tōkum Long/Short Healthcare UCITS Fund.

Health, Wealth and Happiness
Michael Peltz moderates a health care panel that discusses investment opportunities in light of the implementation of Obamacare, at the Delivering Alpha conference in New York City on July 17th, 2013. Guests included Jacob Gottlieb, Visium Asset Management; Kris Jenner, Rock Springs Capital; and Larry Robbins, Glenview Capital Management.

Kara Findlay, a spokeswoman for Perella Weinberg, and Larissa Haida, a spokeswoman for Morgan Stanley, declined to comment.

The fund shut, in part, because of the success of more established hedge funds investing in health care, according to a person familiar with the situation.

Examples include Larry Robbins' $6.3 billion Glenview Capital Management, whose flagship fund is up 31.74 percent through July thanks in part to prescient investments in the sector, according to a report by HSBC Alternative Investment Group. The health care-focused Visium Institutional Partners fund from Jacob Gottlieb's $5 billion Visium Asset Management is also up 13.2 percent through August 30, according to a person familiar with the returns. And $14.8 billion Columbus Circle Investors' CCI Healthcare Partners fund is up 17.82 percent through July, also according to HSBC. CCI is led by Anthony Rizza and Clifford Fox.

Performance for Tōkum was uninspiring. Since joining Perella Weinberg, the low-net version of the fund—which controls the most assets—gained 3.10 percent in 2010, 9.01 percent in 2011, 2.51 percent in 2012 and fell 2.24% this year through June, according to a letter sent to investors.By comparison, the S&P 500 Healthcare Index gained 0.71 percent in 2010,10.18 percent in 2011, 15.19 percent in 2012 and 19.06 percent through June this year.

The funds were led by Emile Westergaard, who founded Tōkum independently in 2007 and brought his team to Perella Weinberg in 2010 along with a $75 million injection into the strategy from the new parent firm. Westergaard's plans were unclear; he did not respond to a request for comment.

The losses this year were driven by unidentified short positions.

"At the Fund level, in this rising tide, our short portfolio has been an exercise in pain," Westergaard wrote to investors in July. "In particular, our value bias on the short portfolio has been ineffective without direct catalysts in a market that has revalued the entire sector. While we see many opportunities in the short portfolio as a result of this indiscriminate run, we recognize that timing plays an important role and that the evidence must be irrefutable in a glass half-full environment."

Tōkum never attracted significant assets, managing about $180 million assets when the decision to close was made in August, according to a person familiar with the situation. The hedge fund managed about $25 million before joining Perella Weinberg and grew to about $253 million in June 2012.

Other small funds didn't have the same problem. Several healthcare hedge fund launches this year have attracted investor attention and capital, including Kris Jenner's Rock Springs Capital, Alex Denner's Sarissa Capital Management and Neil Shah's March Altus Capital Management.

(See Jenner's recent comments on healthcare investing at CNBC's Delivering Alpha conference with Gottliebof Visium and Robbins of Glenview.)

Tōkum's shuttering comes as Perella Weinberg is launching a new hedge fund, the PWP Global Macro Strategy. The offering will be led by new firm partner and portfolio manager Maria Vassalou, a veteran of McKinsey &Co.'s MIO Partners, SAC Capital Advisors and Soros Fund Management.

—By CNBC's Lawrence Delevingne. Follow him on Twitter @ldelevingne.

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