One of the biggest hedge funds in the world, Marshall Wace, which has circa $52 billion in assets, is launching a late-stage venture capital fund. The move is another sign that managers that usually invest in public companies are seeking returns in private markets.
The leading hedge fund is said to be raising up to $400 million to invest in privately-owned healthcare companies, specifically biotechnology, life sciences, and medical technology enterprises. Marshall Wace plans on buying pre-IPO and holding on after listing, bucking the normal trend of hedge funds stepping in at or post-IPO. The hedge fund is focusing on companies going public in six to 24 months and will invest in Asia, Europe, and the US.
It is the first instance of the company creating a vehicle using outside money to invest in private companies. In the future, it may launch more of these funds, investing in additional fast-growing sectors. The opportunity they see here is that the private market can be more efficient in terms of valuations.
The move is emblematic of how hedge funds and private equity sectors are beginning to merge due to hedge funds looking for new revenue streams.
The new fund creation also highlights how some hedge funds see a gap in financing between early stage venture capital and IPOs.
Hedge fund Third Point has also created a $300 million venture capital fund.