THREADNEEDLE GLOBAL HEALTHCARE FUND
Aim: Growth by investing in pharmaceutical companies, biotechnology, healthcare providers, medical supply companies and producers of advanced medical devices
Minimum investment: Lump sum £2,000
Investment split: Pharmaceuticals 55.5%, healthcare 14%, biotechnology 9.5%, medical technology 7%, medical supplies 8.5%, cash 5.5%
Isa link: Yes
Pep transfers: Yes
Charges: Initial 3.75%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 0800 0684000
The panel: Eric Woodwood, Managing director, E P Ward & Co,
Bob Vaughan, Partner, Ashley Vaughan,
Steve Barton, Steven Barton Financial Services,
Neil Franklin, Partner, Franklin Financial Services.
Suitability to market 6.0
Investment strategy 6.8
Past performance 7.4
Company's reputation 7.5
Product literature 5.3
The Threadneedle global healthcare fund aims for capital growth by investing in biotechnology, pharmaceuticals, healthcare providers, medical supply companies and companies which manufacture medical devices. It is the company's first sector fund.
Looking at the market suitability of the fund Woodward says: “Theme funds seemed to be particularly popular launches about two years ago and there are a number of funds in the healthcare and related areas.” Barton says: “Most health funds are less than two years old. This is the fourth new health fund this year. Framlington health, being the oldest, has attracted fair amounts of money for a thematic fund and so there must be a market. However, with the three other launches this year, is Threadneedle too late in the market?”
Franklin thinks it is a good long-term area and welcomes more competition. Vaughan says: “This fund is one of a relatively small group of funds specialising in the health industry and combines the various sub-sectors of the Dow Jones Global Healthcare Index into one fund. The fund comprises of 30 to 40 stocks. Other funds may specialise only in one section of the market, such as pharmaceuticals or biotechnology.”
Identifying the type of client the fund would suit Franklin says: “Those who want more exposure to sector investment within their portfolio. It is a long term buy and hold investment.” Barton says: “Clients who like the thematic approach and probably older clients who are more aware of the healthcare market. Pharmaceuticals may also be viewed as good recovery stocks.”
Woodward says: “Clients seeking diversification from geographic-based funds may be attracted to this type of fund, although funds that were launched in the last few years have not proved to be as defensive as some may have expected.”
Assessing the fund's marketing potential Vaughan says: “Healthcare is always a volatile issue and there will be a section of the investing public who will feel that investment in these areas will reap high rewards. However, investment appears to be linked to research and development rather than proven sales and the marketing opportunities are somewhat limited due to the risk.”
Woodward says: “I think it may be quite difficult to market a new fund especially as the established funds have had a difficult two years performance wise.” Barton says: “Very little marketing potential. It is the fourth health fund this year and depressed markets with so much uncertainty are putting off private investors.”
Considering the positive features of the fund Barton says: “The thematic approach is good. The US market is the major sector for this type of holding so it might well be regarded as an overweight US fund.” Franklin highlights Threadneedle's track record, the competitive charges and the international structure of the fund.
Woodward says: “Threadneedle might feel that now is the right time to launch a fund like this. Valuations have fallen to more reasonable levels and some falls recently look somewhat overdone on a long-term basis. Threadneedle has made much of its team-based approach. This is in contrast to most funds it is competing with, which have quite high profile lead managers.”
Vaughan says: “The most saleable features are the mix of pharmaceuticals, medical supplies, providers of healthcare and medical technology. This, added to the fact that you have an investment team running the fund rather than one fund manager, offers stability.”
Discussing the fund's investment strategy Woodward says: “It seems well enough thought out and there is a long-term case for considering such a fund. But it is a very difficult market at the moment and in the near term I think retail interest will be relatively low.” Barton says: “Due to the team management and having the Dow Jones Global Healthcare Index as its benchmark, it might prove over-conservative compared to a single manager with more global options.”
Highlighting the fund's drawbacks, Woodward says: “The institutional share class has quite a high minimum investment and it is probably not an easy time to launch a growth styled fund.” Franklin points out that it is a specialist fund that may duplicate investments held in other funds. He also thinks it may struggle to achieve capital growth and it may be difficult to maintain profits.
Vaughan says: “I see no real disadvantages other than those of potential risk and the possible reluctance among investors who have lost money by investing in similar funds over the last two years.”
Analysing the company's reputation Franklin thinks it is first class. Barton says: “Threadneedle as a brand name is becoming better known. Its equity performance is average and the managers nominated to run this fund have only average performance in their current sectors.” Woodward says: “Threadneedle has a good reputation for both equity and bond investment.” Vaughan says: “The Threadneedle name has been around long enough to be familiar with the investors and it has a fairly good reputation for innovative products and performance.”
Moving onto Threadneedle's past performance record Vaughan says: “Overall, the company has had some very creditable performance, quite often in the first quartile and the team management approach appears to be working.” Woodward says: “It's pretty good and Threadneedle has built a sound enough reputation for delivering consistent performance across a number of its funds.” Franklin says: “Solid, steady and dependable.”
Highlighting the likely competitors for the fund Woodward says: “Framlington is one of the stronger players in this market and the Schroder medical discovery fund has also had periods of good support. While not quite the same, they are bound to be considered alongside this fund. There are also other players like the funds from Britannic and M&G, which are not so long established.”
Vaughan says: “Probably the most well-known competitor is the Framlington health fund and its separate biotechnology fund. Schroder medical discovery and Sarasin global health also come to mind.” Barton goes for Framlington health, Sarasin global health and M&G global health.
On the issue of charges, Woodward thinks they seem very fair and compare favourably with the competition. Vaughan thinks the charges are reasonable but Barton thinks that the annual management charge is high. In Franklin's view, the initial charge is very competitive and the annual charge is typical.
Moving on to the commission, the panel agree that it is standard. Woodward adds that it represents good value for fee-based clients since it has a lower spread than most other funds in the sector.
Looking at the product literature Barton says: “It follows the usual Threadneedle style, so it is easily recognisable. However, it is rather dour for a launch product brochure.” Franklin thinks it is okay but a bit basic. He complains that the print size is small and the graphs are a bit complicated.
Woodward thinks it is okay and feels it states the key facts but is hardly motivational. He says it strikes him as functional rather than being of much use in the marketing role. Vaughan says: “It is basic, but easy to read and understand.”
Summing up Woodward says: “I can see some merit in the fund and Threadneedle's team approach is reasonably well stated. But retail investment in the short term is unlikely to be strong at the moment.” Franklin concludes: “A fund I'd recommend in the right circumstances but it may struggle until the economies pick up.”