Polar Capital Global Healthcare (PCGH) has announced draft proposals for a corporate reorganisation ahead of its scheduled fixed life wind-up in early 2026. Following a review of options and consultation with shareholders, the board intends to seek approval for the company to continue, with a number of structural and fee changes designed to enhance long-term value.
Under the plans, the trust’s global healthcare investment strategy will remain unchanged, though the board proposes allowing up to 30% of assets to be invested in small and mid-cap stocks (below $10bn market cap), alongside its core large-cap exposure. The fixed life structure would be replaced with an obligation to offer a 100% tender to shareholders on or before 31 March 2031, and every five years thereafter. A 100% tender will also be offered immediately for those who do not wish to remain invested.
The board has agreed changes to management fees, removing the performance fee and lowering the base fee from 0.75% to a tiered structure of 0.70% on the first £500m of assets and 0.65% thereafter. The dividend policy, which focuses on capital growth and pays two small dividends annually, will be maintained. The existing gearing limit of 15% will also be retained, with a target of around 10% when conditions allow.
On discount management, the board says it will continue to make use of buybacks to help manage volatility and maintain a narrow discount, alongside the newly introduced five-yearly tender mechanism.
Full details of the proposals, including the terms of the tender offer, will be set out in a shareholder circular and put to a vote at a general meeting in due course.
QD comment from Matthew Read: The proposals from Polar Capital Global Healthcare look well thought out and address several issues that can weigh on fixed-life trusts as they approach their wind-up date. Removing the finite life should give the managers more freedom to pursue their long-term strategy without the overhang of an approaching liquidation, while the introduction of a regular five-yearly tender balances this by giving shareholders comfort that they will have periodic exit opportunities at close to NAV.
The reduction in fees – both through the removal of the performance fee and the introduction of a tiered base rate – is also a welcome move that should make PCGH more competitive against peers. Allowing greater flexibility to invest in smaller and mid-cap healthcare stocks could also broaden the return potential, adding exposure to innovative companies beyond PCGH’s large-cap core.
Over the longer-term five and 10-year time periods, PCGH is the best performing fund in its peer group returning 8.4% and 7.2% per annum respectively over these periods – despite the obvious headwinds the sector has faced in recent years. We believe that now would not be an optimal time to liquidate PCGH’s portfolio with healthcare stocks being out of favour but, regardless, we believe that PCGH deserves the chance to continue both because of its shareholder friendly structure and its long-term performance record.
