A healthy hedge.(Fariba Ghodsian of Castle Creek LifeScience Partners)

Fariba Ghodsian

Castle Creek LifeScience Partners

Biotechnology's constant pace of innovation makes it an enthralling sector for investment opportunities. Pushing the boundaries of discovery provides the possibility for unprecedented gains and losses. When navigating this "final frontier," it helps to have a proven guide like Fariba Ghodsian.

Ghodsian, who currently heads up research for Castle Creek LifeScience Partners' $85 million biotech hedge fund, has had her fingers on the pulse of the industry for more than a decade. Ghodsian was a director of healthcare research at Roth Capital Partners, and a biotech analyst at Lehman Brothers, Sutro & Co./Tucker Anthony and Wedbush Morgan. She also worked in the industry and has a master's from MIT, an MBA from UCLA and a Phi) from Oxford.

During the past year, Ghodsian realized that her talents might be put to better use on the buy side. "There have been increasing problems on the sell side with the SEC and conflicts of interest brought up--and that makes things a lot more difficult going forward," say Ghodsian. She also took into account the difficult year biotech had weathered before she made the switch. "I thought that biotech stocks were at a level where they could be attractive for a buy-side fund," she says.

In fact, biotech companies are starting to merit the attention of buy-siders, but selectivity is key. In 2002, biotechs experienced the largest correction in their history. "Given that correction, I don't expect there to be another major correction, but rather more stabilization."

The fund is a long/short fund and, on the long side, Ghodsian takes advantage of stocks that have dropped in price due to some negative misperceptions. On the short side, she looks for stocks that have run ahead of themselves due to overexcitement on the Street.