Since Mr Bowler took over the £149m fund in March 2004, the investment process and approach have stayed firm. However he says one aspect that has evolved is his conviction on best ideas. He says: “When you are running a fund you are always learning. What I have learnt is to be able to distinguish the stronger ideas, whereas previously I was too timid.”
Perhaps for this reason the fund sits at level five on a risk-reward profile, so towards the riskier end, with ongoing charges of 1.67 per cent.
Given the specialist nature of the sector, macroeconomic issues tend to be peripheral, but with the emergence of ‘Obamacare’ in the US, with the president introducing more affordable healthcare, the economic backdrop is now delivering more opportunities than ever before.
When it comes to stockpicking, Mr Bowler says he is trying to mine out companies with strong drivers, and right now he sees very strong portfolios in development at industry stalwarts Roche, Merck and AstraZeneca. He says: “When I am assessing for example, pharmaceutical and biotechnology firms, I want to find the companies with strong innovations, which are powerful enough to get investors interested.”
Mr Bowler is hugely encouraged by developments in the sector. “The most exciting thing right now is cancer research,” he says. Mr Bowler highlights that a number of companies, including sector giants and current investments Roche and AstraZeneca, have been creating new ways to use the immune system to treat the disease. Dubbed immuno-oncology, around half the world’s cancer patients are set to receive the revolutionary treatment over the coming years, and the manager believes this potential has yet to be priced in by the wider market.
Alongside innovation, Mr Bowler is always on the look out for “self-help” stories, where underperforming firms are in the process of turning their fortunes around. He cites specialist contract manufacturer for the pharmaceutical industry, Lonza Group. He says: “The company had previously not been managed effectively. But its new CEO has improved the firm’s efficiency and capacity and I believe there is more to come on this story.”
The healthcare sector has enjoyed a period of stellar performance in recent years and has substantially surpassed the gains made on mainstream indices. While the past five years has witnessed the FTSE 100 deliver a total return of 61 per cent and the S&P 500 rise by 105 per cent, the MSCI ACWI/Health Care Index has achieved 125 per cent, and the Schroder Global Healthcare fund has delivered 118 per cent, according to FE Analytics at September 15 2014.
Since Mr Bowler took over the reins in 2004, the portfolio has firmed by a healthy 191 per cent, outpacing the index by two percentage points. Mr Bowler says specialist biopharmaceutical group Shire, bolstered by an exciting product pipeline and decent acquisitions, has been very beneficial, but more recently hit “full valuation”, so he banked his profits. In contrast he admits he held onto Bristol Myers Squibb, another global bio-pharmaceutical corporate, for just a bit too long. He says: “We benefited a lot from it last year, and at the start of 2014 there was a lot of expectation around the firm, but ultimately that has not come through just yet.”
Looking ahead, Mr Bowler believes investment opportunities in healthcare should be abundant. “There are powerful drivers to keep investors interested. In aggregate the sector has done well. While large-cap pharmaceutical companies have been re-rated from their 2009 lows, valuations are back to more historic average levels; they are not stretched,” he says.
He points to the US president’s overhaul of the nation’s health system. “The government is becoming a bigger payer of healthcare. In the short term, hospital companies such as HCA will benefit, while insurers, including UnitedHealth Group, could see benefits over the long-term,” he says.
EXPERT VIEW
Darius McDermott, managing director, Chelsea Financial Services
Launched in 2000 and having had the same manager since 2004, this fund is now one of the more established funds in the open-ended healthcare sector. The fund’s investment objective is to achieve capital growth by investing in healthcare, medical services and related products and companies on a worldwide basis. Investment will be indirectly held in transferable securities. The fund may also invest in funds, warrants and money market instruments. The fund has outperformed its benchmark over one year, and keeps pace with it over three and five years.
