Polar Capital Global Healthcare (PCGH) has effectively set a 40% limit on the forthcoming 100% exit it is offering shareholders as part of its eight-year reconstruction.
Although shareholders in the top-performing £458m investment trust will be free to sell all their shares in the tender offer next month, the company has set a minimum of £270m of net assets that it needs to continue.
Should investors tender more than 40% of PCGH shares, the company will wind up and return its capital to shareholders, according to a circular published yesterday.
The document details the proposals outlined by the company last month, the most significant of which is replacing its eight-year fixed term, which was due to end next year, with an unlimited life.
Shareholders are being offered the 100% tender in case they don’t want to commit to another period of investment. Similar exits will be offered every five years as part of a discount control policy designed to keep the share price close to the underlying net asset value (NAV) of the company’s investments.
As things stand, shareholders can expect to be offered a tender price of 381.43p, which is 99% of the current NAV to reflect costs that will be capped at 1%. That’s slightly higher than the current 377.3p share price due to the stock trading at a small 2% discount to asset value.
Naturally the company wants to continue and with that in mind is seeking authorisation from shareholders to re-issue shares that are sold in the tender offer.
Fund managers James Douglas and Gareth Powell have run the portfolio since 2019, two years after its last reconstruction. According to the Association of Investment Companies, PCGH is the best performer in the Biotechnology and Healthcare sector over five years, having largely avoided the bear market from which biotech funds have only recently emerged. Its total shareholder return of 64.3% compares well to the 13.8% average decline in its seven-strong peer group.
The managers hold 34 stocks mostly spread across pharmaceuticals, healthcare equipment and biotechnology with 53% invested in the US, followed by Denmark (13.7%), UK (6.1%), Switzerland (5.2) and India (4.6%).
In QuotedData’s last report on PCGH, we said the fund managers remained confident that their long-term growth themes around medical innovation, technological delivery, emerging markets and mergers and acquisitions remained intact.
In their latest commentary, Douglas and Powell said the two big policy risks from the Trump administration had receded last month. Confirmation that drugs companies could avoid 100% import tariffs if they build more manufacturing capacity in the US, and Pfizer striking a deal with the US government on onshoring and prices saw the MSCI All Country World Daily Health Care index gain 1.4% in September. PCGH did better with NAV up 3.9%.
Winterflood analyst Alex Trett praised the proposals as strong governance. “Removing the fund’s eight-year fixed-life structure may reduce the frequency of liquidation opportunities, but it does provide greater certainty, which we regard as best practice.”
Under the timetable set out in the circular shareholders have until 25 November to tender, or sell, any of their shares, and send in their votes for the general meeting on 27 November. The results of the tender offer and the tender price will be announced on 1 December.
