SARASIN GLOBAL HEALTH FUND
Aim: Growth by investing in pharmaceuticals, biotechnology and medical technology companies
Minimum investment: Lump sum £1,000, monthly £100
Investment split: Pharmaceuticals 40%, biotechnology 30%, medical technology 30%
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5%, annual 1.5%
Commission: Initial 3 %
Tel: 020 7246 0430
Suitability to market 6.0
Investment strategy 6.7
Past performance 4.0
Company's reputation 6.0
Product literature 7.4
The panel: Daniella Glover, Financial adviser, Stephens Harsant Wall,
Luke Gibbon, Proprietor, Independent Personal Financial Management,
Nikki Foster, Savings & investment manager, Chase de Vere.
The Sarasin global health fund is an Oeic that aims to produce capital growth by investing globally in pharmaceuticals, biotechnology and medical technology.
Considering the market suitability of the fund Foster says: “Global healthcare is a specialist sector fund fitting into the more speculative end of the managed funds range. It would not be used as a core fund, but would be held on the periphery of a portfolio to provide diversification.” Glover says: “It provides an additional fund to the very small and specialist health and medical sector.” Gibbon points out that the fund specialises in the healthcare industry, but more specifically in pharmaceuticals, biotechnology and medical technology.
Identifying the types of clients the fund could attract Glover says: “Clients with substantial resources in core holdings, who are looking to diversify in sectors with specific potential, and are prepared to take more than average risk with a view to the longer term.” Gibbon says: “This fund should only be used for clients who have experience of, and understand, equity investment.” Foster says: “Growth investors who are not risk averse and who already have a healthy and sizeable balanced portfolio, encompassing a wide range of sectors and global markets.”
Assessing the fund's marketing potential, Gibbon thinks it could allow for diversification of existing clients' portfolios, but feels it will be of limited use. Foster says: “It would fit nicely into a growth or specialist sectors mailing. The fund provides ideal means to capitalise on people's growing awareness of health, and the role that the healthcare industry will play going forward in current market conditions. It may be difficult to sell as investors are currently more defensive following two years of flat markets or underperformance.” Glover thinks it could be used to broaden a portfolio to reflect modern daily life in a more conservative fund than many in the sector.
Highlighting the main useful features and strong points Foster says: “The fund provides an excellent opportunity for capital growth through exposure to potentially one of the largest growth industries. It can bring diversification to a portfolio through sector and geography, although with globalisation, there could be a debate about geography.”
Glover says: “The blending of a proven investment style based on themes, to develop the potential of a sector which seems to have long-term prospects. The management style may make performance less volatile. The investment team is experienced and qualified in both fund management and health technology.” Gibbon says: “There are very few funds that specialise in healthcare and this could prove to be a strong point.”
Discussing the investment strategy Glover says: “The style is thematic, with investment in both large companies in the pharmaceutical sector and the smaller cap companies in the biotechnology and medical technology sectors. This approach allows for development of the core themes of corporate restructuring and the use of technology, while blending stability and defensive qualities with the more unpredictable cutting edge.” Gibbon says: “The investment strategy will probably provide higher gains or losses as healthcare companies' share prices can be quite volatile.”
Foster says: “Sarasin's aim is to create well-balanced portfolios that capture major investment themes and trends. As globalisation is currently helping to break down geographical boundaries, fund managers are seeking to exploit growth through sector. Sarasin has been doing this and developing its strategy over the last 150 years, which places it strongly in the investment market.”
Pointing to the fund's drawbacks Gibbon says: “It would appear that 25 per cent of the fund will be invested in five companies and clearly the performance of these shares could be crucial. Finally, there is a currency risk, as nearly 80 per cent will be invested in the US.” Glover says: “The fund is in a very specialist sector, which has proved to be rather volatile and so may not appeal to a wide audience.”
Foster says: “As the fund is themed, it is very specific in terms of which stocks it can invest in. External forces, for example, patents and regulations, can have a dramatic effect on some stocks, pushing prices both firmly up and down. As a result, there is potential for the fund to capitalise on fantastic highs, but there is also greater risk of loss. This increases the fund's risk profile.
“Further points to consider are if another sector is leading the way, the fund will miss out. The healthcare market lies primarily within North America, so there could be implications for sector and geographical diversification if an investor's portfolio already has a weighting there. The fund will mainly invest in growth stocks and will not be suitable for investors requiring income.”
Turning to Sarasin's reputation, Glover sees it as a sound and well-established company. Foster says: “Sarasin has a strong reputation within the investment market, both as a bank and an investment house. It is especially regarded in the management of theme funds, of which it is a pioneer. It does not run a large number of funds, which for some is a concern, as it could limit flexibility for switching funds.” Gibbon says: “Sarasin is not widely well known in the UK, so it is difficult to judge its reputation.”
Looking at the company's past performance Glover says: “Its investment style has not benefited from stockmarket conditions of the past couple of years, resulting in disappointing performance across the board.” Gibbon says: “Sarasin only has funds available in the UK. Three of those funds do not have a significant track record and the remaining two have below average returns over the last three years.”
Identifying likely competitors for the fund, Gibbon goes for Framlington health and NPI global care. Foster says: “Any other healthcare medical funds, such as Britannic global healthcare, First State global health & biotech and Schroder medical discovery. These funds are not theme funds, but will invest in the same sector.” Glover cites Framlington health and Schroder medical discovery.
Glover thinks the charges are fair and reasonable. Foster says: “The charges are standard for most UK Oeics, but some companies are scaling down their charges.” Gibbon says that although the charges would not deter him from investing, they could put off some clients.
Gibbon thinks the initial commission is standard, but points out it is lacking renewal commission. Foster and Glover think commission is standard.
Looking at the product literature Foster says: “It is good. Clear and simply presented on a double sided fact sheer, with a supplementary booklet explaining the investment themes in more detail. An additional booklet showing the charges houses the application form, which is presented in an easy to understand format.” Gibbon found the literature concise and informative.
Summing up, Gibbon says: “If Sarasin want to make a significant impact in the UK, I think it will need to improve its fund performance and reduce charges.”