The managers of investment trust Bellevue Healthcare are confident the future of the global healthcare industry is a bright one.
Ageing populations across the world and the exponential growth in chronic illnesses mean demand for healthcare services is here to stay, irrespective of any economic downturn.
So confident are the management team that since the start of the year, they have used £80million of low-cost borrowings to increase the trust’s holdings in equity markets.
The two individuals overseeing the £1billion portfolio – Paul Major and Brett Darke – have also been busy buying more personal shares in the trust, a sure-fire sign that they believe the outlook is more positive than negative.
‘Of course, as an investor in equities, you can’t dismiss the Putin factor,’ says Major, ‘Or for that matter, geopolitical tensions in the South China Sea.
”It explains why we have kept some powder dry just in case something happens which causes share prices to plunge sharply and suddenly. If that happened, we would use the borrowings we have yet to employ to buy even more shares in the companies we own.
‘The fact remains that many of the companies we invest in are super-resilient businesses that will keep on growing. They provide a degree of certainty in an uncertain world.
The trust is invested in 29 healthcare stocks, most listed in the United States.
‘We keep an eye on some 250 companies,’ says Major. ‘Most are small to medium-sized businesses doing extraordinary things in the healthcare sector. But their share prices have been hit by the general slide in US equity values over the past nine months.’
Bellevue’s numbers confirm this. Over the past year, the trust has recorded losses of nearly 9 per cent. This compares with five-year gains of 73 per cent.
‘Our job is to find companies that can deliver healthcare solutions, whether it is in disease prevention, diagnosis, treatment or recovery,’ says Major. Among the trust’s top 10 holdings is CareDx, a US company that provides at-home testing kits to people who have had a major organ transplant.
‘The tests help reduce the risk of organ rejection,’ says Major. ‘They are able to identify any adverse impact on the replacement organ as a result of the drugs being used – and any weakening of the immune system that could trigger other conditions.’
The investment trust has had a holding in CareDx on and off over the years, but reinvested in the company in September last year.
Another big fund stake is in Axonics, a business that has developed a small electronic implant that helps people who suffer from involuntary leakage of the bladder or bowel.
The implant sends out a current that stimulates nerves that control the bladder and bowel, stopping leakage.
When someone wants to use the toilet, they deactivate the implant through a hand-held switch. Quarterly financial results for Axonics, released last week, showed a 50 per cent increase in company revenues, compared to the same period last year.
The trust has a stock market identification code of BZCNLL9 and a ticker of BBH. Annual charges total 1.1 per cent.
Given its specialist nature, it is a fund that should only form a small part of an investor’s portfolio. One attractive feature is that it pays a regular dividend, equivalent to around 3.5 per cent per annum.
The latest interim dividend of 3.235pence compares to last year’s payment of 3.015pence and a share price of £1.74.
Rival trusts include Polar Capital Global Healthcare and Worldwide Healthcare.
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