Discovery unit trust, which launches this week, will be biased towards pharmaceuticals and large cap...
Discovery unit trust, which launches this week, will be biased towards pharmaceuticals and large cap stocks.
As previously reported in Investment Week, the fund will be managed from New York by Kristine Bryan. The initial portfolio will have around 75% to 80% in pharmaceuticals with around 10% in areas such as biotechnology.
Bryan will invest in a universe of approximately 75 companies. The 15 largest healthcare companies make up 85% of the sector's global market cap.
Schroders believes companies outside the top 75 in the healthcare sector have poor earnings potential.
Bryan said: "The aim of this fund is to achieve long-term capital growth through investments in healthcare companies worldwide.
"Our principal sectors are pharmaceuticals, medical technology, medical supply and biotechnology and healthcare services. The steady growth of pharmaceuticals companies is protected to some extent by product patents and by the fact that entry to the market is very costly for new players.
"Their challenge is to maintain a steady flow of products that will more than offset products facing patent expiry.
"On occasion we are presented with a fast growing company whose valuation has not been appreciated by investors but for the remainder of the portfolio I like to take a balanced approach, incorporating both high growth and value stocks."
Bryan will look for companies with growth potential and sustainable revenue growth with new product discoveries seen as the most important driver of earnings. She said she was on the look out for stocks which could benefit from a merger deal.
The group believes that although healthcare company earnings underperformed the S&P 500 last year with an average of 15% growth, earnings will pick up this year as the economic environment remains positive.
Bryan added: "A major theme in the demand for healthcare today is demographics. The number of people in the world aged over 65 is expected to more than double by 2025. This age group on average consumes five times as many medicines as those in younger age groups.
"The potential increase in demand for medicinal drugs could be huge in future, especially when you consider that the average life expectancy in the west is now around 76 years."
Schroders is also launching its pan European technology unit trust this week.
Schroder Eurotech will be managed by Michael Grant and will have a portfolio of 50 to 60 stocks.
Both funds will have an initial charge discount for unit trust investments during the launch period running until 9 June where the initial charge will be 3.25%.
The standard initial charge is 5.25% on both funds and the annual management charge is 1.5%.
The front end charge for Isa investments in both funds is 3.25%.
IFA commission on the funds is 3% initial, with 0.5% renewal.
Commission is available on Isa and Pep investments, and up to 4% is available for Pep transfers.
The minimum investment for both funds is £1,000 lump sum or £50 per month.