17/02/2010 Author: Elana Margulies

PBS Capital creates first separate account

PBS Capital Management, a Texas-based healthcare hedge fund started by Highland Capital veterans, has created its first separate account for a Dallas family office.

According to an investor letter, the family office allocated $10m to the account which will be dedicated to investing in pharmaceutical royalties, an asset class the hedge fund structure is also expected to employ.

Last month the PBS Capital Fund returned 1.2%.

At the same time, the Health Care Select Sector SPDR increased 0.7%, the S&P 500 declined 3.7%, and the Russell 2000 declined 3.7%.

PBS invested around 22% (gross) in biotechs, by far the largest allocation for the manager, beating facility investments, which accounted for 17% at the beginning of February.

HFMWeek previously reported that PBS modified its fee structure after investors were unclear about a revenue-sharing agreement the fund had instituted. With the revision, the fund lowered its management fee to 1.25% and has an incentive fee of 20% of profits over a 5% hurdle.