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ISA 2020: Investing in healthcare

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Written by: Darius McDermott
02/04/2020
All eyes are on the healthcare industry to help and protect the population from the coronavirus pandemic. Today and in the future, investment opportunities will be plentiful.

Even before the coronavirus pandemic, we knew that healthcare budgets in many countries were stretched, and the pressure to develop new medicines, new health products and more efficient tools and practices was building – thanks to the demands of an ageing and increasingly health-conscious world population.

The past few weeks have magnified this problem and today, as governments around the world try to control the spread of the disease so that it doesn’t overwhelm our healthcare systems, all eyes are on the industry and its workers.

We are clapping the people we once took for granted. And we are following closely the developments of biotech companies and scientists, as they work 24/7 trying to find medicines, tests and, ultimately, a vaccine that can protect us from the virus.

Everyone getting involved

Even companies in different sectors are turning their hands to other products and services to help out. For example, Inditex – the owner of clothing chains Zara and Mango – is using its global network to produce items such as surgical masks and hospital gowns for patients and medical workers alike.

LVMH – better known for perfumes, luxury goods and champagne – has switched factories producing perfume to making 12 tonnes of hand-sanitising gel. And a consortium of over 20 car and plane manufacturers named Ventilator Challenge UK, has come together to scale up production of essential medical devices, with the aim of offering the NHS up to 30,000 medical ventilators.

When the worst of the crisis has passed, I believe the quest to deliver the holy grail of better healthcare for less money will continue. And the investment opportunities will be plentiful.

With just a few days left of this tax year, for those who have yet to use this year’s ISA allowance, it’s a case of ‘use it or lose it’. So why not use it by investing in global healthcare?

Three funds investing in healthcare

Polar Capital Healthcare Trust

This trust invests in healthcare companies predominantly from four sub-sectors: pharmaceuticals, biotechnology, medical technology and healthcare services.

The portfolio is split into two segments: growth and innovation with a circa 90/10 split. The growth element is made up of predominantly larger companies, whereas the innovation pot will invest into medium and smaller companies that have the potential for greater growth in the long run. These innovation companies are typically disrupters of conventional medical practices, mainly driven by structural transformation and employment of technology.

Baillie Gifford Global Discovery

For those looking for a little more diversity, this fund’s objective is to produce attractive returns over the long-term by investing globally in smaller companies that, in the opinion of the managers, offer excellent growth prospects.

In essence, it looks for innovative businesses that are capable of changing the world. It currently has 40% of the portfolio invested in healthcare companies. Alnylam Pharmaceuticals, a biopharmaceutical company, Teladoc, a global virtual care provider, and Novocure, a commercial-stage oncology company, are all among its top ten holdings.

Comgest Growth Europe ex UK

This is a high conviction fund investing in high-quality European companies for the long-term. New stocks usually start as a 1% position and will be added to over time. The portfolio currently has just 36 holdings, the largest of which is Roche, the Swiss pharmaceuticals and diagnostics company.

One of its products, Actemra, which is used for rheumatoid arthritis, is currently being trialled for patients experiencing a more serious coronavirus infection. The fund also holds medical technology companies Ambu and Coloplast and its total weighting to healthcare companies is 33%.

Darius McDermott is managing director of FundCalibre

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