Royal & SunAlliance Eurolife has established the RSAE Framlington health fund, a mirror fund that invests in the Framlington International Portfolios health fund.
This Luxemburg-based Sicav aims for capital growth by investing in healthcare and medical products and services. Biotchnology is likely to consist of around 40 per cent of the portfolio with lesser amounts going into healthcare services, medical devices, medical technology, drug delivery and pharmaceuticals.
This sector split is built on the belief that growth in the biotechnology is likely because of research into the human genome, while growth in pharmaceuticals may be slowing down due to fewer products emerging from this sector.
The mirror fund will benefit from the management skills of Framlingtons healthcare team, headed by Antony Millford. Millford has managed Framlingtons UK health fund for 13 years and has 30 years experience at the company.
The team will select stocks on a bottom-up basis and look mainly for small and mid-caps, which have better growth prospects than large-caps. The stock selection process involves looking at analysts recommendations, attending healthcare conferences and meeting the companies that are being considered for investment.
Healthcare may be attractive from a long-term perspective because the ageing population is likely to increase demands for healthcare. Companies who can meet this demand in a cost-effective way are currently undervalued, but they could generate high returns for investors.
However, healthcare is also a risky sector and this may make it difficult for the fund to attract investors in the current environment.
According to Standard & Poors, the Framlington international portfolios health fund is ranked first out of 22 funds based on £1,000 invested on a bid-to-bid basis with gross income reinvested over three years to July 8, 2002.