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Fund manager accused of harassment hits out over exit

Fund manager accused of harassment hits out over exit

Sam Isaly, veteran former manager of Worldwide Healthcare (WWH), has spoken for the first time of his anger at his departure from the investment trust after allegations of sexual harassment.

Orbimed, the US healthcare investor which Isaly founded and now manages more than $14 billion (£10.6 billion), announced Isaly was stepping down in December, two days after health industry publication Stat News published allegations he had sexually harassed women in the workplace, which Isaly denied.

At the time, Worldwide Healthcare announced Isaly was retiring as manager and board member of the trust as a result of his stepping down from Orbimed, which runs the trust. Sven Borho took over his role as manager.

Isaly, who attended Worldwide Healthcare’s annual general meeting in London yesterday, is furious about the manner of his departure from the trust, which he had run since its launch in 1995, and took aim at chairman Martin Smith.

‘He fired me as a portfolio manager in early December against my will. I did not resign,’ he told Citywire after the meeting.

While Isaly’s departure from Orbimed had been announced in December, it was not until April this year that Orbimed reported Isaly had transferred his controlling interest in the fund group and stepped down from his position as managing member.

Neither Orbimed statement made reference to the allegations made against Isaly, with both referring to succession planning.

A spokeswoman for Worldwide Healthcare pointed to Orbimed’s December announcement of Isaly’s stepping down from the group.

‘As Sam was no longer with OrbiMed, it was totally right and proper that he couldn’t be their representative on the Worldwide Healthcare board, and as such this responsibility has been taken on by Sven,’ she said. 

Isaly would not be drawn into discussing the claims made against him, which included allegations he showed hardcore pornography in the office, made lewd jokes and sexist comments and verbally abused female employees.

‘I’m not going there. I’m not answering that,’ he said. ‘My accuser should have the opportunity to present her assessment of things.’

Isaly was a surprise presence at Worldwide Healthcare’s annual general meeting, taking a front-row position in his wheelchair. A wrestling accident in his late teens left him paralysed.

Shareholders applauded Isaly as Smith opened the meeting by praising the former manager’s record. Since its launch in 1995, the trust's shares have risen 3,360%, the best record of any UK closed-end fund, according to Orbimed.

‘I’d like on all our behalf to thank him for the huge contribution to the affairs of this company since it began,’ Smith said.

Borho referred to Isaly’s departure as he kicked off his address to shareholders. ‘The trust has been in the headline news over the last few months,’ he said. ‘The recipe for this terrific success over the last 20 years is very much still in place.’

In an awkward exchange during questioning that followed Borho’s presentation, Isaly questioned the trust’s recent performance.

‘There are some inconsistent data,’ said Isaly, pointing to a slide in Borho’s presentation showing 0% excess returns – or returns ahead of the benchmark, over the eight months to the end of August.

‘Frostrow [which manages the trust’s investor relations] has not yet posted the August factsheet, unless I didn’t see it on the website last night, but I’ve seen Frostrow data two days ago that shows calendar year to date, expressed in sterling, approximately -3% of excess returns,’ he added.

‘Ten weeks ago, in early July, that number was 3%. Does that accord with what you see?’

Borho responded: ‘Sam, I think you know the answer. Sam, this data are the correct numbers. Peak outperformance of the fund was in June, that is correct. Since then, there has been a pullback. I think you know exactly the reason,’ he added.

Borho pointed to a slide showing how the fund’s positioning in the emerging biotech sector and the emerging markets region had driven performance in its financial year to the end of March. ‘You yourself showed this slide last year,’ he said.

Borho said that since the end of June, the fund’s relative performance had fallen back as emerging markets had dropped.

‘You’re correct – if you look at the last two months, because of that structural positioning, that relative outperformance at the beginning of the year, that narrowed down.’

Borho said the fund’s record of outperformance was ‘not a straight-line graph’. ‘Sometimes you outperform, sometimes you underperform. If this was a straight line graph, it would be the benchmark with leverage.’

Speaking to Citywire after the meeting, Isaly stood by his questioning. ‘I don’t want to be definitive, but it looks to me like there has been a dramatic shift in performance. When I stopped in December the portfolio was set for excellence.’

He highlighted the presence of Jazz Pharmaceuticals (JAZZ.O) in the portfolio, which he said was ‘not my doing’ and pointed to the potential misuse of its Xyrem narcolepsy drug.

‘What is a company selling date rape drugs doing in this portfolio?’ he said.

Jazz Pharmaceuticals is held in a number of mainstream equity funds in the US, as well as by some UK healthcare funds. Worldwide Healthcare’s closest rival, Polar Capital Global Healthcare (PCGH) had a 1.9% position at the end of September last year, according to its latest annual report.

Isaly, who was 72 at the time of his departure from Orbimed, also questioned Smith’s role as chairman of the trust, saying he was now ‘well into his 70s’. ‘Has the board taken note of his age, and what plans are there for succession?’ he said.

He added that Smith’s praise of his record was ‘warranted’. ‘I did a great job over 20 years. Excellence was always my objective,’ he said. ‘I hope Orbimed can follow in my footsteps.’

After leaving Orbimed, Isaly has focused on running his own family office. He said he was planning to make a return as a fund manager once his non-compete clause with Orbimed expires in May next year.

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