Polar to launch Global Healthcare Growth and Income investment trust

Polar Capital plans to launch a healthcare-focused investment trust targeting the historically low valuations on offer in the sector.

Expected to raise between £100m to £150m in its mid-April offer period, the trust will be run by Daniel Mahony and Gareth Powell – managers of the group’s Healthcare Opportunities fund.

The second investment trust for the boutique, after its Technology vehicle, the new company is likely to be called the Polar Capital Global Healthcare Growth and Income trust.

Unlike the open-ended fund, which is focused on growth, the new trust is expected to offer a yield and focus more on value opportunities.

Polar believes on a relative P/E basis, the healthcare sector is currently sitting on 30-year low valuations and a 20% discount to the market.

Mahony and Powell’s Healthcare Opportunities fund, launched in December 2007, invests across the market-cap spectrum and has only a small weighting to large-cap pharmaceutical stocks.

The investment trust is likely to have a greater allocation to large caps and will focus on a potential turnaround in pharmaceuticals.

Polar also expects to allocate 20% of the initial portfolio to companies in higher growth segments – including device and service companies as well as biotechnology.

While falling research and development productivity and prospects of an impending patent cliff have led to lower earnings and negative investor sentiment for pharmaceuticals, Polar expects an inflection point for the sector to occur in the coming years.

It believes pharmaceuticals will return to growth and be valued accordingly within the next seven years, with the potential for 30% to 40% P/E multiple expansion.

Chelsea Financial Services’ managing director Darius McDermott believes the launch has come at a key moment for the healthcare sector.

“This is a timely launch considering the spotlight on the sector from the Obama reforms,” McDermott says.

“Taking into account the political movements and the historically low valuations available in the space, it does look like an interesting offering.

“Especially as cash returns are likely to be low for some time, the yields currently available from the healthcare sector are going to be appealing for many investors.”

A listing on the London Stock Exchange is expected by the beginning of June.