Biotech fund says broader health tech ripe for investment

One of Europe’s leading biotech investment trusts, BB Biotech, is to expanding into the broader healthcare market with a new London-based venture.

The new fund is based on the conviction that med tech, healthcare IT and other healthcare fields are less well understood than biotech – and also underfunded and undervalued.

But BB Healthcare says judicious investments in these companies could produce healthy returns for investors as their technology gains traction over the next decade or more.

Led by two experienced investors, Daniel Koller and Paul Major, the new BB Healthcare will be managed by Bellevue, which has around $4 billion currently invested across a portfolio of companies across healthcare and geographies.

The company has announced an initial public offering for BB Healthcare, aiming to raise £200 million on the main London Stock Exchange.

The company says it will have a “high conviction, long-only investment” strategy across a broad range of healthcare investments. This is likely to include: pharma, biotech, medical devices and equipment, healthcare insurers and facility operators, healthcare-delivery related IT, drug retail, consumer healthcare and distribution.

After two year of seemingly unstoppable growth, biotech stocks slumped late last year, undermined by political and economic uncertainties. The US Nasdaq Biotech ETF is currently down 21% in the year to date. But while these stocks are watched closely, other healthcare-related firms outside this field offer investment opportunities.

"Bellevue has earned the respect of the industry for the performance it has generated with BB Biotech,” said Justin Stebbing, chairman of BB Healthcare Trust plc.

“This new investment trust, BB Healthcare, will give investors access to these same skills, but across the wider global healthcare market. The world is getting richer, older and spending more on a range of healthcare products and services.”

He says healthcare equity valuations don’t currently reflect the full long term potential of the industry, making it a good investment opportunity.

Stebbing concluded: “In Bellevue we have a portfolio manager that has an established fundamental approach that has consistently identified opportunities and delivered for investors."

The fund will be ‘unconstrained’ and will invest regardless of market cap, sub sector or region, but will take a more ‘concentrated’ approach to its investments.

Koller and Major say the portfolio will cover a maximum of 35 holdings, compared to the 60+ for current portfolios of existing trusts.

Vote of confidence in UK

Setting up the fund in London is also a vote of confidence in the UK as it prepares for Brexit.  Bellevue says it expects most of its portfolio will be US-listed companies, which it concedes could leave it open to ‘significant exposure’, given that BB Healthcare base currency will be sterling.  However it says the fund will not be hedged using any sort of foreign currency transactions, forward transactions or derivative instruments.

BB Healthcare will set a target dividend each financial year equal to 3.5% of net asset value as at the last day of its preceding financial year.

It will reveal its full investment policy in its forthcoming prospectus, expected to be published in early November.