Sectoral Asset Management, headquartered in Montreal, has set its sights on entering the U.S. mutual fund market--through a sub-advisory side door.
Sectoral has no plans to start its own U.S.-based mutual fund from scratch or launch its own proprietary fund complex with a separate fund catering to every asset class. Instead Sectoral, which officially opened its doors just 13 months ago, is hoping to parlay its expertise in managing worldwide healthcare and biotech stocks into a subadvisory relationship with a U.S. fund management company or two.
The company's expertise in the field comes from its leadership: Both Jerome Pfund, Sectoral's CEO, and Michael Sjostrom, Sectoral's CIO come from Pictet & Cie, the closely held private bank headquartered in Geneva.
"The U.S. market is the most important market in the world. It's where you have to be," said Martin Noel, chief marketing officer of Sectoral. His mission is to search out and identify U.S. fund companies who want to offer a healthcare and/or biotech fund, but don't necessarily have the expertise to manage it themselves.
No Distribution Expertise
On the flip side, while Sectoral has the expertise and resources to manage a global healthcare and biotech mutual fund, it admits that it has neither expertise nor the desire to distribute funds itself within the U.S. marketplace, said Noel.
Additionally, the firm has no plans to start its own mutual fund from the ground up and compete against some of the larger, more veteran and better known mutual fund sponsors.
Sectoral is currently talking with several potential fund company partners; an effort that was delayed due to the September terrorist attacks in the U.S., said Noel. Sectoral has no qualms about partnering with either load or no-load fund groups, although an intermediary-distributed fund group would probably be a better fit, said Noel. He added that Sectoral would be just as interested in managing a brand new healthcare/biotech fund as an existing one.
New Company, Veteran Managers
While Sectoral is a relatively new player in the investment management field, and a virtually unknown name in U.S. mutual fund circles, its founders are not. Pfund was most recently the CEO of Pictet and Co's. North American operations unit based in Montreal. Sjostrom was head of Pictet's global pharmaceutical and biotechnology research.
Since 1994 the two have been responsible for the management of the Pictet Global Sector Fund Biotech, an offshore fund domiciled in Luxembourg and sold to Swedish, Italian, German and Swiss investors through Pictet's private banking network. The fund currently has $1.5 billion in assets under management.
To put that into perspective, if Sectoral were managing those same assets in a U.S.-domiciled healthcare/biotech fund, it would be the seventh largest fund manager in that sector, said Noel.
First Client Is Former Employer
When Pfund and Sjostrom left Pictet to start their own investment firm in October 2000, Pictet agreed to let them continue managing the fund under a subadvisory agreement with Sectoral. That was the first time Pictet had allowed an outside team of managers to oversee one of their funds, said Noel.
Happy in its niche as the fund's subadvisor, and contractually bound by a non-compete agreement which bars Sectoral from offering a competing healthcare/biotech sector mutual fund in Europe, the firm set its sights on the U.S. market.