The £659.7m Frostrow Capital Worldwide Healthcare Trust has been co-managed by Samuel Isaly and Sven Borho since its inception in April 1995.
The trust invests in the global healthcare sector with the aim of achieving a high level of capital growth, with performance measured against the MSCI World Healthcare index. The managers have the ability to use gearing and derivative transactions to mitigate risk.
Mr Isaly refers to the trust’s mantra, which is that it “seeks to capture the best of the worldwide healthcare sector”. He adds: “We launched the trust as an alternative to AstraZeneca and GlaxoSmithKline because there really wasn’t much for a UK investor to choose from and over time [since launch to June 30 2014] we have outperformed those.”
Turning to the investment process, Mr Isaly explains: “We select our investments as the best healthcare investments anywhere in the world. We are not making sub-sector or geographic decisions. Macro factors do come into it, but I would have to say, mostly at the edges. We’re looking for the best companies.
“We follow around 1,000 public companies worldwide and they get assigned to our analyst team. We’re looking for earnings per share growth of the trust in the range of 15 per cent. Not all companies have to make that cut, but the balance of the metrics does.”
Mr Isaly looks for stocks with sound, long-term growth prospects and the prospect of technological advances.
“We are invested in technological advance and we think the pace of change in medical technologies or opportunities has accelerated,” he adds.
When the trust launched in 1995, it had 37 names in the portfolio and total net assets of £226m. By June 30 2014, that had grown to £654m and 64 holdings.
Mr Isaly points out: “In the earlier period we had 30 to 40 names in the portfolio; that’s now moved up to 60.
“In 2011 we enhanced the investment mandate beyond pharmaceuticals and biotech to pick up all healthcare sub-sectors including medical devices, life-science tools and agnostics, so we have a somewhat broader trust than in earlier years.”
The trust has ongoing charges including performance fees of 1 per cent. It is US-centric and has a bias to large caps.
“We think the best way to perform is by concentrating on a sector, so we’re very pleased with the performance of this trust over time,” notes the manager.
The investment trust has outperformed its benchmark, the MSCI World Healthcare index, over one, three, five and 10 years, according to FE Analytics. In the 10 years to September 23, the trust has delivered a 260.07 per cent return to investors, against the benchmark’s 181.69 per cent.
Over five years, the fund has delivered returns of 175.96 per cent, compared with 123.81 per cent by the index.
The portfolio’s top contributors to net asset value performance in the year to March 31 are “reasonably large” companies. Among the top five are Incyte, Illumina and Intermune.