Similar to Warren Buffet, our fund approaches stock buying as investing in a piece of a wonderful business. As such, we would acquire mostly long positions for our investment. There are more upsides to going long while having limited risks. By going long, there is a potential to gain multiple folds on an investment. In special situations, however, we may go short. We let the market dictate our strategy, and our structure always follows our strategy. To hedge against the elevated shorting risk and its limited upsides, our short positions make up no more than 10% of the fund’s capital.
As the most lucrative biotech investment opportunities reside in the USA, we focus our investments on public equities listed on a major U.S. exchange (i.e., NYSE or NASDAQ). Information and filing for such companies are more transparent and readily available. Accurate information tends to produce robust returns. The US market also reimburses drugs at a premium, boosting the profit margin for our portfolio holdings.
While we primarily invest in common stocks, we may also occasionally allocate up to 10% of our capital in options. We anticipate holding around 30% of our capital in cash, cash-equivalents, and/or U.S. Treasury securities (i.e. T-Bill) at our inception. Based on market conditions, we will vary it roughly between 10% and 40%.