MSNBC – When Icagen went public in February, the company drew interest from a relatively new breed of investors: hedge funds.<\/p>\n
Several of these investment firms, including Chapel Hill-based Silverback Asset Management, bought shares of the Durham-based biotech, quickly becoming its single largest investor group.<\/p>\n
As of Sept. 30, nine hedge funds owned more than 11 percent of the company’s shares, more than the combined tally of mutual funds and banks, according to Lionshares.com, a Web site that tracks shareholder data.<\/p>\n
“Certainly in terms of IPOs, (hedge funds) have been active,” says Richard Katz, Icagen’s chief financial officer.<\/p>\n
Hedge funds are loosely regulated investment pools that make money by betting on the movement of a company’s publicly traded shares and debt. Unlike mutual funds, they sometimes take short positions – betting share prices will fall – and search for arbitrage opportunities within a company’s financial instruments.<\/p>\n
Hedge funds have grown in number and size over the past few years and are filling a gap in funding for companies, especially smaller cap biotechnology outfits that cannot attract the interest of mutual funds. Smaller biotechs are perceived as risky bets that demand a deep understanding of their science.<\/p>\n