The Worldwide Healthcare trust has proven popular with investors, becoming the largest portfolio in the IT Biotechnology and Healthcare sector with assets under management (AUM) of more than £2bn.
It is no wonder, with an enviable track record that boasts a 324.9% return over the past decade, outperforming both the MSCI World Healthcare index and sector.
However, returns have declined 17.2% in the past year as the value rotation has led to major sell offs in the equities market, and in particular the healthcare space.
The trust’s manager, Trevor Polischuk, tells Trustnet why he believes in “buying the fear” and holding onto stocks through extreme market volatility.
Tell me a bit about the trust
I believe we're the largest dedicated healthcare investment fund in the world, which means we invest across all of the sub sectors within healthcare, and we seek to invest across all market caps and company sizes too.
What really sets us apart is the uniqueness that we're healthcare only across all of our funds, all of our platforms and everything that we do
What sets you apart from other trusts within the IT Biotechnology and Healthcare sector?
There’s a depth and breadth to what we do, and we sometimes think of healthcare investing a bit like an arms race.
In terms of our setup, we invest globally and not all our competitors do. We also invest across both private and public equity more than others and that creates some unique opportunities.
Where are you seeing opportunities?
I believe China has the fastest growing healthcare market in the world right now so having exposure to there is super critical.
It’s been in the headlines quite a bit over the past year and a half, but when you’re investing in China it’s important to be investing along with the central government’s mandates and ideologies.
When I look back over the past five years or so, the government there has instituted some very important legislation that has been very supportive of investing in healthcare. We think that has really fostered innovation.
How have Chinese government policies affected your view?
The main domicile for innovation is still the US, so our exposure there has remained very high at anywhere from two-thirds to three-quarters of the portfolio.
In China, our exposure has been more dynamic for a number of reasons. It reached as high as 20% in 2020 because a lot of those names were doing very well.
The halo of Covid and the collective response of the healthcare community in the pandemic was so phenomenal that investors rotated into healthcare quite broadly that year, but 2021 brought about a lot of headline risk in China.
The government changed legislation around certain sectors like education and some technology areas, so investors grew nervous about potential changes to healthcare policy as well.
While we certainly don’t see anything specific from the central government that would be detrimental to healthcare, we acknowledge the headline risk going forward, and we've therefore reduced exposure to the low double digits.
What’s been your best performing stock recently?
One of our best stock calls over the past year has been a large-cap US pharmaceutical stock called Abbvie, which has been one of the leaders in the therapeutic space.
It markets the largest selling drug in the world called Humira, which is an injectable medicine for a whole host of inflammatory diseases, predominantly rheumatoid arthritis.
But with every good drug in the healthcare space, there's a finite lifespan due to patent protection – as the lifecycle for Humira was coming to an end, the share price dropped significantly.
We had a high degree of confidence in the new products they had in the pipeline, so we bought the fear and when they eventually got the thumbs up, the price rebounded significantly.
So Abbvie actually became the single largest contributor to performance in the fiscal year, contributing over £43m to net asset value.
Do you ‘buy the fear’ often?
I think that's a very common strategy for specialists, not only in healthcare but across different industries.
When you are very much in the reeds of some of these names and actively monitoring a particular universe of stocks, you’re in a position to make an investment decision fairly quickly.
Our two key strategic overweights over a number of years have been emerging biotech and Chinese healthcare – these biggest overweights have seen some of the most massive underperformance that the trust has ever seen.
What was your biggest detractor from performance?
Biotechnology makes up a significant overweight within our portfolio, especially emerging biotechnologies. These are mid-cap stocks and small names that don't have any revenues, don't have any earnings, but play a key role in clinical development.
These stocks have just undergone the largest and longest drawdown in their history – over the past 18 months they’re approaching 70% declines since they peaked in February 2021.
One example of that is a company called Mirati Therapeutics, which is a US-based biotech company.
It’s been an important holding for the Worldwide Healthcare trust but the stock has declined 85% since its high last year, making it the largest loser in the portfolio in the fiscal year that just closed.
There's been a little bit of volatility with the development programme for Mirati, but the biggest destroyer of value has just been the broad market sell off in biotech stocks rather than something more fundamental.
This is maybe an example of buying the fear, but we stuck with this stock throughout the turmoil of last year and at the beginning of this month the company disclosed some additional data which made it our biggest contributor to performance at least this month.
Sometimes a big loser can turn into your next winner if you have the confidence to ride out extreme volatility.
What do you do outside of stock picking?
I'm a big animal lover – I have an Alaskan Malamute called Yuki who is often my sidekick during Zoom presentations.