DRESDNER RCM BIOTECHNOLOGY
Who says a fund can't stay hot one year to the next? Not those watching this bio/tech fund.
Last year's No. 1 performing health/biotechnology fund was Dresdner's RCM Biotechnology fund. It ended 1999 with a total return up over 111 percent. This year the fund's on fire again: It was the No. 1 performer in its category for the third quarter gaining 26.66 percent over that three month period. And, its year-to-date performance of up nearly 120 percent through Sept. 30, placed it in the No. 2 slot, according to Lipper Inc.
Faraz Naqvi is one of three portfolio managers on the fund. All three have backgrounds as physicians giving these managers a unique investment edge as fundamental analysts. "We look at things understanding what the clinical data is and what the scientific data is," says the 34-year old Naqvi who has been managing the fund for the past two years.
Here's more about this sector fund that typically holds about 50 stocks in its portfolio and flips somewhere between 80 and 100 percent of its holdings each year:
Q: Can you tell me why your fund has been doing so well this year?
Naqvi: First of all, the underlying sector is doing well. Over the past five months the biotech sector was up 44 percent. So you've seen real strengths in the sector.
What the biotech sector traditionally needs (to perform well) is two big influences: It needs either money or news flow. So based on money flows, we saw money flows into the biotechs being pretty substantial, which was a good indicator. With the announcement of the mapping of the human genome, that was a good news flow indicator.
We've managed to outperform because we identified a couple of trends.The first came with that announcement of the mapping of the human genome. We thought that was going to serve as a real catalyst for some companies like Millennium Pharmaceuticals and another named Human Genome Sciences. So we actually took pretty big bets on those companies.
Then, we looked at companies that we thought would be indirect beneficiaries of that---like Abgenix and Protein Design Labs.
Q: How about a holding that has worked well for you and another that hasn't?
Naqvi: One company we own is called Praecis Pharmaceutical. It's a company we knew had a really solid foundation and bought it as an IPO during the depth of the biotech crisis earlier this year.
They have a couple of drugs that they are developing. One is for prostrate cancer and it's in collaboration with Amgen. Beyond that, the scientists in this company are out of MIT and have this complex scheme of developing new drugs that we thought was great. The stock came out at $10 a share and its now at $32. So it has returned us well over 300 percent.
A company we've been disappointed in is Biogen---they have a drug for multiple sclerosis. We were pretty excited about this drug and the company's ability to develop new drugs but they've disappointed us in terms of coming out with new products. So, we basically sort of hung it up with Biogen then the stock ended up going down and from a value perspective, looked pretty cheap and we've actually reinvested in it.
Q: What do you like best about your job?
Naqvi: What I love best is that you're dealing with the cutting edge of what's going on in medicine and we'll know more than the doctor's will know. But the most exciting thing is you get to deal with very high level doctors, very high level management and it's sort of like being paid to do the most exciting things in the world.
Q: How about the future for biotech?
Naqvi: I think biotechnology has the capability of completely transforming the way medicine is practiced. Once we really get a good fundamental understanding of human genomics, health will become something that will be tailored. We will basically know what diseases we are predisposed to and how to avoid those diseases.
Q: And who is the fund best suited for?
Naqvi: Anyone who wants exposure to the most exciting portion of the health care sector. However, it is a risky volatile area to invest in so you should be pretty rational about how much you invest and not go over board.
|FUND:||Dresdner RCM Biotechnology N|
|TOP HOLDINGS:||Amgen; Millennium Pharmaceuticals; Genentec; Immunix; and Medimmune.|
|PERFORMANCE:||Year-to-date through Sept. 30, up 119.98 percent. In 1999, the fund was up 111.40 percent.|
|MINIMUM INVESTMENT:||$5000 (for N shares)|
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