A Healthy Return
Since the late 1980’s local investors have been advised of the importance of investing globally, using a regional structure to spread their investment (ie weighting their investments across various countries to create a global portfolio).
Friday, October 19th 2001, 11:45AM
While a global investment strategy is still a core investment principle, investors are now being advised that a portfolio containing "sector" funds (ie funds that focus on specific industries such as healthcare or technology) is becoming an equally acceptable strategy.
The emergence and growing importance of "sector" funds is due in large part to the impact of globalisation, and the fact that many companies are now multi-national and often listed on more than one stock exchange. This means that, by constructing a portfolio of sector funds, investors can still achieve a regional spread, but with a focus on high growth industries.
To reflect this changing focus towards sector funds, AXA launched two specialist sector funds in July this year - Global Equity Healthcare and Global Equity Technology.
While technology stocks have suffered from the "tech wreck" over the last year, indications are that the worst is over. The computer industry is showing signs of recovery, while other areas such as the dot com industry appear to have hit the bottom.
The news for the healthcare industry is even better. Demographic trends, combined with the pace of medical advances, suggest that this sector is entering an exciting period of strong growth.
World wide healthcare spending is huge and, according to research, it's going to become even greater. Consider these facts from the U.S.:
- A third of the population is expected to be over 50 by 2015
- Americans currently spend US$1.1 trillion each year on healthcare, and this is expected to double in less than 10 years (at which point the average American will be spending $7,170 pa on health care)
- Expenditure on healthcare is expected to reach 16% of GDP by 2008, with an increasing proportion being spent on drugs.
At the same time, medical advances mean that pharmaceutical companies are now recouping their development costs and generating profits more quickly than before. Think about the following trends:
- In 1998 there were 6,900 human genes mapped and genome-based drugs accounted for US$13.7 billion in annual sales - there are now approximately 32,000 genes identified
- In the five years to 1993 the US Food and Drug Administration (FDA) took an average of 29 months to approve each of the 25 new drugs launched into the market - in the following five years (to 1998) they approved 34 drugs at an average of 17 months each.
AXA's new Global Equity Healthcare fund, managed by Alliance US, is well positioned to take advantage of these market trends. The fund has a current five-star rating from ASSIRT (the independent Australian research house) and, in the year to 30 June 2001, returned a comfortable 9.6%. As at the 31st of March 2001, Alliance US had more than US$20 billion invested in the healthcare industry and had been actively involved in this sector for 17 years.
Norm Fidel, the Fund's New York-based manager, has 31 years investment experience (20 of them with Alliance Capital), and 12 years managing Alliance Capital's Healthcare portfolios. He says that Alliance is very positive on the outlook for the Fund's holdings. "Earnings growth for the Fund's portfolio is expected to be extremely healthy in 2001-2002, compared to a very weak corporate profits picture, at least in the near term. Currently, the Fund's portfolio sells at a 5-10% premium to the market multiple, a relatively low valuation parameter when viewed historically. New product introductions continue to advance, while demographics (aging of the population) provide no doubt about demand growth for healthcare products on a worldwide basis."
With ongoing and dramatic changes in the world's population, and our continually-improving knowledge of the science that underpins the healthcare industry, it is clear that there is a potential for investment growth in the health care sector.
For investors, getting access to advancements or products that can change lives for the better and bring keen investment returns, is possible through the AXA Global Equity Healthcare Fund. Just speak with your Adviser, or contact an AXA Sales Manager.
Click to download Healthcare fund fact sheet
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The underlying investments of the AXA Global Equity - Healthcare Fund are predominantly held in listed companies engaged in the discovery, development, provision, production or distribution of products and services that relate to the diagnosis, treatment and prevention of diseases and other disorders. Generally, shares in the portfolio are issued by companies that:
The portfolio manager uses an active, bottom-up investment style to select around 30-50 stocks. The majority of investments are in US companies, which dominate the global health care market, although up to 40% of the fund can be invested outside the US. |
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