Worldwide Healthcare’s results for the year ended 31 March 2015 reflect the strength of the healthcare market over that period but also considerable outperformance by the manager. The NAV return for the year was 53% – more than 17% ahead of the 35.9% return on their benchmark (the MSCI World Health Care Index). The return to shareholders was 49.8%. The dividend (which is a by product of the investment process rather than something subject to a specific objective) fell to 12.5p from 15p.
Over the fund’s 20 year life (to 28 April 2015) the NAV has compounded at 16.5% per annum while the benchmark has compounded at 11.9%, equating to a 2104% return on NAV compared to a 948% return on the benchmark.
Part of the outperformance during the year under review relates to the company’s gearing, which averaged out at 12% over the year. The Board is tweaking some of the restrictions on managing the fund to allow maximum gearing to be 20% (currently £120m or 20% whichever is the lower) and to allow the manager to invest more in some areas of the healthcare markets where they were previously restricted to 15% of the portfolio.
Orbimed, the company’s manager, says the largest contribution to the fund’s performance came from Actavis (recently renamed Allergan) which has been engaging in a number of accretive acquisitions. Medivation, a global leader in the treatment of prostrate cancer, did well as sales of Xtandi rose and they established proof on concept that it might work as a breast cancer treatment as well. Regeneron Pharmaceuticals has strong sales of its blindness treatment, Eyelea, but Orbimed also think they have a strong R&D pipeline with candidates for the treatment of high cholesterol, rheumatoid arthritis, and atopic dermatitis. Roche’s bid for InterMune was beneficial to the portfolio. Finally, HCA Holdings, turns out to be a beneficiary of Obabmacare as fewer patients have no insurance and so they are paying HCA’s bills for healthcare.
On the downside, insulin pump manufacturer Insulet said it had been overstating sales; Vocera Communications suffered as hospitals constrained capital expenditure; Shandong Weigao Group Medical Polymer lost revenue as it restructured its sales channels; and Biosensors lost market share to competitors.
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