Set fair for the future

Polar Capital Global Healthcare (PCGH) has delivered good returns for its shareholders, and the relative performance against its benchmark is strong. It has achieved this despite headwinds, from concerns over the policies of Donald Trump and runaway performance in other sectors, notably technology. The resounding endorsement by shareholders of its package of measures in November (which we covered in our last note here) indicates their confidence in the future of the trust.

Since our last note, the managers of PCGH have made some significant changes to the portfolio’s sector weightings, in particular a reduction in the allocation to healthcare equipment. The managers are confident in the fundamental strength of the overall healthcare investment opportunity.

Long-term capital growth from healthcare stocks

PCGH seeks to deliver long-term capital growth by investing in a diversified portfolio of healthcare companies from around the world. The portfolio spans a range of geographies, healthcare subsectors and company sizes, giving the managers the flexibility to allocate across the global healthcare opportunity set.

Market background – challenges, but the sector outlook remains strong

In our last note in November (which can be read here) we focused on the long-term drivers of the global healthcare market. Demographic change and the potential for higher spending in emerging markets, in particular, are very positive for the sector, and the PCGH managers believe that this thesis remains firmly intact.

The US regulatory environment

The US regulatory environment under President Trump has been better than expected.

The PCGH managers say that a positive in recent months has been around US regulation. The election of Donald Trump and the controversial appointment of Robert Kennedy Jr as secretary of health and human services led to widespread industry concerns. However, drug approvals are still getting through the Food and Drug Administration – including 46 in 2025 – and many of the key people at the agency have stayed, giving important continuity of contacts. There has been a reduction in the level of vaccinations in the US, at least partly due to Kennedy’s long-standing scepticism, but vaccine businesses remain a small part of the PCGH portfolio exposure.

Drug-pricing risk has also eased somewhat in the past year. The Trump administration’s push for “most-favoured-nation” pricing initially raised concerns that US pharmaceutical revenues could face an aggressive reset, but the first major agreement, with Pfizer, appears to have reduced the risk of a more sweeping and adversarial intervention. Under the deal, Pfizer agreed to offer most-favoured-nation pricing to Medicaid and make discounted drugs available through the planned TrumpRx direct-to-consumer platform. Other companies, including AstraZeneca, have since reached similar agreements.

Reasons to be optimistic about the sector

The PCGH managers see several reasons why healthcare should do well from here:

Innovation – pipeline newsflow remains strong across the sector, and the pace of new drug approvals continues to demonstrate the industry’s ability to bring new products to market. Year-to-date to the middle of May, there had been 14 new novel drugs approved by the US Food and Drug Administration. This is particularly important at a time when healthcare systems globally are under pressure to improve access, increase efficiency and address unmet medical need. Innovation is not confined to medicines, but also includes delivery devices, diagnostics and technologies that can improve the way in which care is provided.

Consolidation – large pharmaceutical and biotechnology companies continue to face the challenge of patent expiries over the coming decade, which creates a need to replenish pipelines and sustain revenue growth. M&A has already continued at a healthy pace in 2026, with several transactions struck at meaningful premiums. This is supportive for smaller and mid-sized healthcare companies with attractive assets, particularly in biotechnology, where PCGH remains overweight (see page 6).

Rising healthcare utilisation – demographic change, evolving patient behaviour and the continued clearing of pandemic-era backlogs are supporting demand across a range of healthcare subsectors. This should benefit companies exposed to areas such as healthcare services, distribution, equipment and facilities, particularly where higher volumes can feed through into stronger revenue and profit growth.

Easing of US policy concerns – US policy risk has been a major source of pressure on healthcare valuations. However, some of this concern has eased as the policy backdrop has become clearer. In particular, the continuation of Medicare drug price negotiations has so far been more targeted than some investors had feared, while the focus on pharmacy benefit managers suggests that policymakers are also looking at other parts of the healthcare supply chain rather than placing the full burden on drug manufacturers. A less severe outcome than the market had been discounting could support a recovery in sentiment towards the sector.

Slowing economic growth – healthcare’s defensive characteristics become more attractive if economic growth slows. Demand for medicines, treatments, medical devices and healthcare services is less sensitive to the economic cycle than many other areas of the market, as patients continue to need care regardless of the wider backdrop. This can support relatively resilient revenues and earnings at a time when other sectors may come under pressure from weaker consumer spending or lower industrial activity.

Short-term challenges

At the beginning of the year, new short-term challenges emerged, centred on artificial intelligence (AI) and the Iran war. Together these had an impact on the performance of the sector, as shown in Figure 1. However, encouragingly this has been followed by a strong recovery in recent weeks.

Figure 1: MSCI ACWI Healthcare index YTD in sterling

Artificial intelligence

The release of Claude Desktop caused some concern in parts of the healthcare sector.

The PCGH managers have highlighted the concerns that were raised in parts of the healthcare sector in February, following the release of Claude Desktop. These concerns were centred on the threat of AI-driven disintermediation across parts of the healthcare services industry, and the possibility of increasingly-capable AI tools reducing demand for outsourced research, data management and trial support functions over time.

If AI can automate elements of clinical trial design, patient recruitment analysis or regulatory workflows, pharmaceutical and biotechnology companies may eventually require less external support from traditional contract research organisation (CRO) providers. This possibility has created a sharp change in market perception, even though the practical impact of these tools on complex clinical trial execution remains uncertain and is likely to take time to assess.

CROs still play a critical role in the conduct of clinical trials, combining therapeutic expertise, regulatory knowledge and global execution capabilities. Whilst AI may improve productivity and change parts of the workflow, the extent to which it can displace specialist outsourced clinical research providers remains unclear.

Nevertheless, the episode contributed to a derating across the sector, with investors becoming more cautious towards companies perceived as vulnerable to automation. This was a headwind for some of PCGH’s holdings, notably ICON (see page 12).

War in the Middle East

War in Iran has been destabilising for the sector.

The Claude Desktop-related worries were followed by the American/Israeli-led war in Iran, that broke out at the end of February. This has had some direct impact, relating to the closure of the Strait of Hormuz; specifically, disruption to supplies of sulphuric acid – half the global supply of which traverses the strait – and helium, which is used in MRI machines.

Figure 2: US consumer price index (CPI), year to 31 May 2026

However, the bigger risk to the sector is an indirect one, particularly the risk that interest rates will remain higher than they otherwise would. As shown in Figure 2, the months after the beginning of the war have seen US inflation spike higher, with the CPI figure of 4.2% for May being the highest in three years.

With heightened inflation occurring alongside consistently robust labour market growth, previous optimism about interest rate cuts — in the US and elsewhere — has diminished. Outright rate rises are not currently widely predicted, but if these prove necessary, the PCGH managers warn that there is the chance of a repeat of 2022, when rapidly rising rates caused the prices of smaller healthcare companies in particular to fall, as the market turned away from growth stocks. However, it is important to note that this is not currently the consensus forecast among investors, and as stated, the sector has recovered strongly in recent weeks.

Asset allocation

PCGH’s asset allocation has changed quite significantly since our last note.

There have been some significant changes to PCGH’s sector allocation since our last note in November, which used data as at the end of September. As shown in Figures 3 and 4, the largest allocation remains to pharmaceuticals, and the underweight in the sector versus the benchmark has narrowed to 5.5%.

The weighting to the healthcare services sector has increased, with this now being the second-largest overweight versus the benchmark. The overweight position to biotechnology has been maintained, with PCGH’s managers still positive on innovation in the sector.

Exposure to healthcare equipment has been reduced significantly since our last note, from 24.2% and a marked overweight position, to 7.7% and a notable underweight. PCGH’s managers are worried about slowing topline growth in the sector, the lack of new product cycles, and somewhat stretched company valuations. The position will be kept under review, as M&A activity could provide a solution for some companies, and recent share price falls could present some opportunities.

Figure 3: Portfolio by sector as at 31 May 2026

Figure 4: Portfolio sector weights relative to benchmark as at 31 May 2026

The portfolio’s cash component has moved from a small net positive to an 8.4% net negative. This reflects PCGH’s current gearing, which is itself a sign of the managers’ positive view on the opportunities available in the wider healthcare sector.

Figure 5: Portfolio by country as at 31 May 2026

Figure 6: Portfolio country weights relative to benchmark as at 31 May 2026

There have also been changes to PCGH’s country weightings, although these have been less dramatic, and are due to bottom-up stock selection rather than a bigger macro call on any particular country.

The US remains the dominant country in the portfolio, although the underweight versus the index also remains. Germany has moved from the eighth-highest weighting to fifth. Denmark has fallen from second position to third, but remains the largest overweight versus the index.

Top 10 holdings

There have been significant changes to the composition of PCGH’s top 10 holdings since our last note in November. Roche, UnitedHealth Group, CVS Health, Cigna Corp, Novo Nordisk and Merck are all now in the top 10, replacing Abbott Laboratories, UCB, Genmab, Sandoz, Exact Sciences and Edwards Lifesciences. These changes are largely a reflection of the changes to sector allocation detailed above; Abbott Laboratories is a healthcare equipment company, while the new entrants UnitedHealth, CVS Heath and Cigna Corp all sit within the healthcare services sector. There are now six pharmaceuticals companies in the top 10, up from five previously.

Figure 7: PCGH 10 largest holdings as at 31 May 2026

Figure 8: Roche (CHF)

Roche

Roche (roche.com) is a Swiss company that develops innovative medicines and diagnostic tests, with a strong position in pharmaceuticals, oncology, immunology, ophthalmology and diagnostics.

The PCGH managers added Roche after positive data for a key oncology asset in early-stage breast cancer, and on hopes that further pipeline newsflow could transform the company’s outlook.

The company reported first-quarter 2026 sales growth of 6% at constant exchange rates, with pharmaceutical sales up 7% and diagnostics sales up 3%. Growth was supported by demand for key medicines including Xolair, Phesgo, Hemlibra, Vabysmo and Ocrevus, helping to offset biosimilar competition and currency headwinds, particularly the strength of the Swiss franc. However, the shares did weaken earlier this year on disappointment around the Phase 3 trial of its oral breast cancer drug, Giredestrant.

Figure 9: UnitedHealth Group (USD)

UnitedHealth Group

UnitedHealth Group (unitedhealthgroup.com) is a US healthcare and insurance group that operates through UnitedHealthcare, its health benefits business, and Optum, its healthcare services, data, pharmacy and care delivery platform. The purchase by PCGH’s managers played a large part in the increase in the portfolio’s healthcare services allocation to a material overweight versus the index (page 6).

The company reported first-quarter 2026 revenues of $111.7bn and earnings from operations of $9.0bn. The update showed that, despite pressure across the managed care sector from elevated medical costs, regulatory scrutiny and investor concern around Medicare Advantage, UnitedHealth remains highly cash generative and operationally resilient.

Figure 10: CVS Health (USD)

CVS Health

CVS Health (cvshealth.com) is a healthcare services company that combines pharmacy services, pharmacy benefit management, health insurance and retail healthcare.

The company’s recent performance has been helped by signs that pressure in Aetna, its health insurance business, is easing. CVS reported first-quarter 2026 revenues of $100.4bn, up 6.2% year on year, and raised its full-year guidance after stronger contributions from its Health Care Benefits and Pharmacy & Consumer Wellness segments. This improvement counters previous concerns over rising medical costs, margins in the insurance business and execution across its complex healthcare platform.

Figure 11: Cigna Corp (USD)

Cigna Corp

Cigna Corp (thecignagroup.com) is a global health company operating through Cigna Healthcare, its health benefits business, and Evernorth Health Services, which provides pharmacy, care and benefits services.

PCGH’s managers describe Cigna as attractively valued and taking steps to reduce political risk around its pharmacy benefit management business. The market also appears to be modelling very conservative 2026 and 2027 earnings.

Cigna reported a strong first quarter in 2026, with revenues rising 5% to $68.5bn and adjusted income from operations increasing to $2.1bn, or $7.79 per share. The company also raised its 2026 outlook for adjusted income from operations to at least $30.35 per share, reflecting disciplined execution and growth across its diversified platform.

Figure 12: Novo Nordisk (DKK)

Novo Nordisk

Novo Nordisk (novonordisk.com) is a Danish company focused on diabetes, obesity and other serious chronic diseases, including its GLP-1 treatments for obesity and diabetes.

The company remains a global leader in diabetes and obesity through products such as Ozempic and Wegovy, although investor expectations have become more demanding after a period of exceptional growth. Recent updates have highlighted both the strength of demand for obesity treatments and the pressures facing the business, including competition, pricing scrutiny and the need to keep expanding supply.

The shares have been relatively weak in recent months, and the PCGH managers put this down to disappointing 2026 guidance and lacklustre late-stage obesity data for CagriSema, its injectable combination weight loss and type 2 diabetes therapy.

Figure 13: Merck KGaA (EUR)

Merck KGaA

Merck KGaA (merckgroup.com) is a German science and technology company operating across life science, healthcare and electronics. Its healthcare business includes medicines in oncology, neurology and immunology, while the wider group also supplies products and services used in drug discovery, development and manufacturing, as well as materials for semiconductor and display applications.

The company reported a solid start to 2026, with first-quarter net sales of €5.1bn and organic growth of 2.9%. Performance was helped by Process Solutions, part of its life science division, and semiconductor materials, while foreign exchange movements remained a headwind. Merck upgraded its full-year 2026 guidance, reflecting stronger momentum in life science and resilience in healthcare. However, the business continues to face pressure from factors including currency effects and patent-related challenges in parts of its healthcare portfolio.

Performance

Figure 14: PCGH NAV total return performance relative to benchmark to 30 June 2026

Despite the difficult backdrop in the sector, the managers of PCGH have managed to deliver a return comfortably ahead of the benchmark over the past five years, as clearly illustrated by Figure 14.

Figure 15: Total return performance for periods ending 30 June 2026

Both PCGH’s NAV and share price performance over one, three and five years, and since launch, have been comfortably ahead of the benchmark, as shown in Figure 15.

Top contributors

Figure 16: Top positive contributors to return relative to benchmark to 31 May 2026 YTD

Roivant Sciences (roivant.com) is a biopharma company focused on developing and commercialising medicines through its “Vant” model of subsidiary companies. Its share price has been helped by clinical and corporate progress, including positive data in difficult-to-treat rheumatoid arthritis. Roivant has also reached a $2.25bn global settlement with Moderna relating to Genevant and Arbutus patent litigation.

Centene Corp (centene.com) is a US-managed healthcare company focused on government-sponsored health insurance programmes, including Medicaid, Medicare and the Health Insurance Marketplace. Its share price has been helped by a stronger start to 2026, with first-quarter revenue rising 7% to $49.9bn. Performance was supported by Medicaid margin improvement initiatives, better-than-expected medical cost trends in Medicare, and growth in premium revenue.

We have covered CVS healthcare above (see page 8).

As shown in Figure 16, the list of top five relative positive contributors year-to-date versus the benchmark includes two stocks that are not held by PCGH and which performed very poorly. Boston Scientific cut its full-year guidance, while Abbot Laboratories also issued lower earnings guidance and reported softness in parts of its medtech business.

Figure 17: Top negative contributors to return relative to benchmark 31 May 2026 YTD

iRhythm Technologies (irhythmtech.com) fell despite continued growth in demand for its Zio cardiac monitoring platform. The shares were affected by weaker sentiment towards higher-growth healthcare technology companies, as well as lingering concerns around regulatory and legal issues linked to its Zio AT system.

ICON (iconplc.com) was caught up in the market jitters caused by the release of Claude Desktop (see page 4). However, it also disclosed an internal review into accounting issues and withdrawing its outlook. Although the potential revenue overstatement appeared modest in percentage terms, the episode damaged investor confidence and added to wider pressure on contract research organisation stocks.

Fresenius SE (fresenius.com) fell after its 2026 outlook failed to meet market expectations, with forecast core earnings growth falling short of consensus despite continued progress at Kabi and Helios. The shares were also held back by broader caution around the group’s ongoing turnaround, as investors weighed improving cash flow and debt reduction against uncertainty over the pace of profit growth.

In the case of Johnson & Johnson and Merck & Co, PCGH suffered from not holding two stocks that performed strongly. Johnson & Johnson upgraded guidance, while Merck & Co was supported by resilient demand for Keytruda and investor confidence in its broader pharmaceutical pipeline, despite continued scrutiny around its longer-term reliance on the cancer drug.

Premium/(discount)

Over the 12 months ended 30 June 2026, PCGH’s share price moved within a range of a 5.0% discount to a 2.9% premium, with an average position of a 1.1% discount. At 8 July 2026, PCGH was trading on a premium of 1.2%. This is a rare achievement amongst investment trusts in recent years.

The narrowing of PCGH’s discount over Q2/Q3 2025 was likely in anticipation of an exit opportunity, which came in the form of new regular five-yearly tender offers (see below). With loose shareholders removed, the discount tightened further, and when PCGH moved to a premium at the end of 2025, the board was able to reissue equity – a rare luxury for any investment trust in recent years. In total, 6,073,026 shares were issued between December 18 and 20 April.

Figure 18: PCGH premium/(discount) over five years ended 30 June 2026

The board has also said that it plans to use share buybacks to modify discount volatility, as necessary, which should also help keep the discount within a relatively narrow range going forward.

At each AGM, PCGH shareholders are asked to approve the issuance of up to 10% of its share capital and the repurchase of up to 14.99%.

Fund profile

PCGH aims to generate capital growth through investments in a global portfolio of healthcare stocks that is diversified by geography, industry subsector and investment size.

More information is available on the trust’s website polarcapitalglobalhealthcaretrust.co.uk

PCGH started life in 2010 as Polar Capital Global Healthcare Growth and Income Trust with an issue of ordinary shares and subscription shares. The subscription shares were exercised in full in July 2014 and this distorts the trust’s NAV returns for that early period.

In June 2017, the trust was reconstructed and adopted its current name. About 26.3m shares were bought back and 27.8m shares issued around that time. The company also issued zero dividend preference shares, which matured early in 2025.

Regular five-yearly exit opportunities

As discussed in our November 2025 note, in Q4 2025 PCGH proposed a package of measures including lower fees, improvements to the trust’s structure, and regular five-yearly 100% exit opportunities. Shareholders gave the proposals their overwhelming support. At the first of the five-yearly exit opportunities, 27,253,026 shares were validly tendered (22.47% of the issued share capital excluding shares held in treasury). The next exit opportunity will be offered in 2030.

The team has considerable real-world experience of the pharma and biotech industry

PCGH’s investment manager and AIFM is Polar Capital LLP. The lead managers on the trust are James Douglas and Gareth Powell. The management team has considerable real-world experience of the pharma and biotech industry, which should help inform its investment decisions.

PCGH’s performance is benchmarked against the total return of the MSCI ACWI Healthcare Index (in sterling).

SWOT analysis

Figure 19: SWOT analysis for PCGH

Bull vs bear case

Figure 20: Bull vs bear case for PCGH

Previous publications

Readers interested in further information about PCGH may wish to read our earlier notes. You can read the notes by clicking on them in Figure 21 or by visiting our website.

Figure 21: QuotedData’s previously published notes on PCGH

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