LONDON (Alliance News) - The managers of Polar Capital Global Healthcare Growth and Income Trust PLC on Wednesday said they believe they can continue to generate their targeted returns over the life of the company.
Investment managers Daniel Mahony and Gareth Powell of Polar Capital LLP said the healthcare sector doesn't look expensive in terms of valuation. On an absolute level, the comparison of prices to earnings shows multiples in line with historical averages, they said.
Versus the broader market, Mahony and Powell said, healthcare looks "very attractive" in terms of projected growth.
"Therefore, we believe that our investment strategy - where we will maintain a low risk portfolio with a high weighting to pharmaceutical stocks - should be able to meet our goal of delivering a total return in the region of 10-12% per annum through to the end of the life of the company in January 2018," the investment managers said.
"The fundamentals for the sector remain strong - an ageing population will continue to drive demand and companies that help to deliver better healthcare for less money are set to thrive. Innovation within the healthcare sector is certainly not slowing and arguably it is accelerating," Mahony and Powell added.
The trust's top ten holdings at the end of September included US healthcare and pharmaceuticals companies Pfizer, Eli Lilly, Johnson & Johnson, Merck & Co and Bristol-Myers Squibb; Swiss companies Novartis and Roche Holding; AstraZeneca in the UK; Sanofi in France; and Astellas Pharma in Japan.
The managers expect "more positive clinical news flow" from the pharmaceutical industry over the next 12 months, which would back their view that "strengthening pipelines and new drug launches can support double digit earnings growth".
"For the broader healthcare sector, we continue to see the risks and opportunities of a structural change in the way that healthcare is managed and delivered. We continue to advocate a two-pronged approach that focuses on (a) the consolidators or (b) the innovators - these are the companies that will decrease the cost and increase the quality of healthcare, respectively," the managers said.
The trust's net asset value per ordinary share of 8.1% in the year ended September 30 was below the 9.6% sterling total return of the MSCI ACWI/Healthcare Index benchmark.
The trust had a net asset value per share of 174.24 pence on September 30, with its shares trading at a discount of 3.4% to that level.
The discount at which the shares traded to net asset value narrowed from 5.4% at the end of the trust's prior financial year.
Chairman James Robinson said it was a financial year of two halves, with very strong NAV performance of more than 18% in the first held back by a fall of more than 10% in the second. The trust had warned shareholders it would be unrealistic to expect the pace of growth seen in the first half to continue.
"As far as market selection was concerned, we were underweight in the US which, after Japan, was the best performing major market, helped by the strength of the US dollar which rose by 6.6% against sterling over the period," Robinson said.
However, that was more than offset by "excellent" stock selection in the US, which was a big contributor to overall portfolio performance.
"Our investments in the biotechnology sector, although small, benefited from excellent stock selection by our managers and therefore made a meaningful contribution to performance, notwithstanding the considerable correction in this area which started in late July and went on until the end of September. Where we did lose out, however, was through our underweight positioning in health care services and managed health care both of which performed well," Robinson said.
Shares in the trust were down 0.4% at 169.30 pence on Wednesday morning in London.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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