Disease-themed funds target baby boomers

Investment company offers trusts of biotech firms working on key illnesses

December 10, 2004|By COX NEWS SERVICE

ATLANTA - For years, investors have been able to channel their money into social and environmentally themed funds.

Now, they can place their bets on diseases.

A new biotechnology investment firm in Philadelphia is offering a mutual-fund-like product designed around five illness categories: Alzheimer's disease, breast and ovarian cancer, diabetes, prostate cancer and rheumatoid arthritis. Each portfolio contains a fixed collection of stocks in companies that are developing or marketing treatments for those diseases.

The companies range in size from giant pharmaceuticals to startup biotechnology companies.

WellSpring BioCapital Partners, the firm that developed the idea, is selling the portfolios as unit investment trusts, which are similar to mutual funds except that the trust is not managed.

Another major difference between the two is that, unlike fluctuating investment mixes in mutual funds, the trusts have a fixed number of stocks in a fixed proportion.

The diabetes trust, for example, features 15 companies, including Abbott Laboratories, Eli Lilly and Medtronic - with about a 6.7 percent stake each. Several portfolios feature overlapping companies, such as General Electric, which develops CAT scan, MRI machines and other testing equipment for a variety of illnesses.

The trusts are aimed at Main Street investors who want to feel like they're playing a part in finding a cure or blockbuster treatment for some of the biggest health problems facing aging baby boomers, said Sam Katz, chief executive officer of WellSpring BioCapital. Potential investors already may suffer from the diseases, or know someone who does, he said.

"People are investing in what they care about," Katz said. "There's a lot of jargon in the biotechnology sector that investors need to know about ... but if they can't pronounce the words or don't understand the science, they're not going to invest in it. However, people do know diabetes. They know breast cancer. They know Alzheimer's. We've created something to connect the dots."

Although sector-specific investing is nothing new, the notion of investing in disease-themed portfolios is so novel that WellSpring BioCapital has applied for a patent.

The trusts will be open to investors until March 15 and are being sold through brokerage firms for a minimum investment of $1,000, or $500 for individual retirement accounts. There's also an initial sales charge of nearly 5 percent of the investment.

Financial advisers have been lukewarm on the idea.

"It sounds more like a clever marketing idea than an impressive investment idea," said Jim McCamant, editor-at-large of Medical Technology Stock Letter, a California-based investment-advice newsletter.

"Being passionate about something often makes for better investments. I wouldn't argue with that. But if an investor really wants to get into biotech, they've got to take the time to learn about it," he said. "It's the management of the companies in a sector that makes the difference, not necessarily the sector itself."

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