There are two funds that I recommend in this sector. One is Axa Framlington healthcare managed by Deane Donnigan which has outperformed the MSCI World Healthcare index over the past five years.
Donnigan has just taken big profits on Biomarin and reduced her holding from 6 to 2 per cent. This share has strong fundamentals but the valuation looks fairly challenging.
She used the profits to buy new holdings in some bigger healthcare firms such as Dentsply and Bar Laboratories. Other big holdings include Gilead Sciences, Nuvasive, Davita and Thermo Fisher Scie.
She believes that the health sector should outperform most other areas of the market and that upcoming earnings’ reports should help to underpin that expectation.
The geographical breakdown of the fund is around 70 per cent in the US, 10 per cent in the UK and the rest widely spread.
The industry breakdown includes around 25 per cent in healthcare services, 22 per cent in health services, 20 per cent in biotech products and 25 per cent in pharmaceuticals.
Another fund I quite like is the Schroder medical discovery fund managed by John Bowler. This fund invests mainly in the bigger healthcare equipment and supply companies as well as pharmaceuticals and also in some small, highly focused start-ups working on specialist products at the edge of scientific knowledge.
Around 50 per cent of the investments are in US companies, with around 15 per cent in Switzerland, 9 per cent in the UK and the rest widely spread.
I believe that all big investment portfolios should have an exposure to these health funds.