Finance

Hedge funds are raking in big bucks from their private markets bets. Here’s how a new fund from Deerfield exec Alex Karnal and ex-Bridgewater COO Brian Kreiter plans to tap into that trend.

Summary List PlacementA new fund, from Deerfield's Alex Karnal and Bridgewater's Brian Kreiter, is jumping on the hybrid train. Braidwell — which sources say is still in the early days of getting set up and meeting with potential backers — will focus on healthcare and life sciences companies that are both public and private.   Karnal, who played quarterback for MIT's football team while in college, is set to be the brains behind the investing for the firm, while Kreiter, who was the chief operating officer for Ray Dalio's Bridgewater for over a year, will helm the business side of the firm. Karnal...

Alex Karnal

Summary List Placement

A new fund, from Deerfield’s Alex Karnal and Bridgewater’s Brian Kreiter, is jumping on the hybrid train.

Braidwell — which sources say is still in the early days of getting set up and meeting with potential backers — will focus on healthcare and life sciences companies that are both public and private.  

Karnal, who played quarterback for MIT’s football team while in college, is set to be the brains behind the investing for the firm, while Kreiter, who was the chief operating officer for Ray Dalio’s Bridgewater for over a year, will helm the business side of the firm.

Karnal joined Deerfield in 2005, eventually rising to partner and managing director at the $14 billion healthcare fund. Kreiter’s departure meanwhile was a part of the big management shake-up at Bridgewater earlier this year, when Nir Bar Dea was promoted to deputy CEO under David McCormick and the firm announced the formation of an investment committee.

Sources tell Insider that Amina Abrahams and Sommer Chatwin will also be directors at Braidwell. Abrahams had been the chief financial officer at Brightline Capital for seven years, while Chatwin worked with Kreiter at Bridgewater as the chief of staff for the COO. 

Blending stock picking with venture capital bets 

As valuations in the private markets continue to go up, more and more managers that would have traditionally played only in public equities have invested in start-ups and unicorns, and Braidwell is no different. 

Private companies in the healthcare, biotech, and life sciences space have been a particular focus for hedge funds. Perceptive Advisors has pumped money into start-ups and launched four SPACs to take certain companies public. Chase Coleman’s Tiger Global has invested $1.7 billion since November into digital health start-ups. 

Private market investing is not limited to established managers either. New fund Vetamer Capital, a San Francisco-based hedge fund from Lone Pine veteran Paul Eisenstein, is investing across public and private fintech companies, and has already made three private bets this year, including UK-based neobank Monzo. Tiger Cubs in general have been big players in privates, with managers like D1 Capital, Coatue Management, and Viking Global Advisors all involved in funding rounds for well-known start-ups. 

While private investments are often considered riskier than more capitalized public companies, the largest private companies can offer a buffer to market volatility thanks to their illiquid status. D1, for instance, lost 20% in January thanks to a short bet against AMC, which was targeted by Reddit retail traders, but its overall portfolio was never in serious danger like Melvin’s partially thanks to its large private book. 

For other managers, the risk is worth the return. In DoorDash’s IPO, for example, mutual funds like Fidelity and T. Rowe Price were immediate winners

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