Healthcare-focused trusts: A sector on the mend

Overview

Edison’s healthcare-focused trusts report examines the current state and prospects of healthcare-focused investment trusts, highlighting the sector’s resilience and potential for recovery following the COVID-19 pandemic and subsequent market corrections.

Key overall themes

1. Sector performance: the healthcare sector, particularly small- and mid-cap biotech companies, is poised for a turnaround due to attractive valuations and a return to fundamentals.
2. Investment opportunities: our report identifies key investment opportunities within the sector, driven by innovation, patent cliffs in big pharma and potential M&A activities.
3. Role of investment companies: investment companies offer investors a strategic way to gain exposure to the healthcare sector, while managing risks, through diversified portfolios and professional management expertise.

Core insights

• COVID-19 impact: investor sentiment and government stimulus during the pandemic drove the sector to historical highs, but subsequent monetary tightening led to a capital flight from biotech, causing a market correction.
• Current market conditions: with interest rates stabilising and beginnings of a reversal in the cycle, the sector is receiving renewed attention, particularly in innovative biotech stocks and companies with strong fundamentals.
• Investment companies: the report profiles several healthcare-focused investment companies, detailing their strategies, portfolio compositions and performance metrics.
• Major sector drivers: biotech companies are expected to lead the charge, supported by innovation and a growing appetite for M&A in big pharma and broader megatrends.

Selected investment companies

Our report provides profiles of various investment trusts, including:

• BB Biotech (BION)
• BioPharma Credit (BPCR)
• Bellevue Healthcare Trust (BBH)
• Biotech Growth Trust (BIOG)
• HBM Healthcare Investments (HBMN)
• International Biotechnology Trust (IBT)
• IP Group (IPO)
• Polar Capital Global Healthcare Trust (PCGH)
• RTW Biotech Opportunities (RTW)
• Syncona (SYNC)
• Worldwide Healthcare Trust (WWH)
• Xlife Sciences (XLS)

Conclusion

We conclude that the healthcare sector, particularly biotechnology, is on the mend and offers significant investment opportunities. Investment trusts are positioned as a viable means for investors to navigate the complexities of the sector and capitalise on its potential upside.

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