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Alternatives to the AXA Framlington Health fund

02 August 2014

Following the departure of manager Gemma Game, Rathbones tips two alternatives to the AXA Framlington Health fund – one giving investors direct exposure, and another giving indirect exposure to the sector.

By Jenna Voigt,

Editor, FE Investazine

Earlier this week AXA Investment Managers announced fund manager Gemma Game was departing its £370.9m AXA Framlington Health fund after three years running the portfolio.

The fund is one of the leading vehicles used to access the healthcare sector, having returned 57.73 per cent over Game’s tenure. The fund sits in the IMA Specialist sector so is difficult to compare to other portfolios. Over that time, the fund’s performance slightly lagged the MSCI World Health Care Index.

Performance of fund vs index since 2011

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Source: FE Analytics

Healthcare is a relatively small sector, but one favoured by the likes of star UK equity manager Neil Woodford. Woodford currently holds UK pharmaceutical giants AstraZenca and GlaxoSmithKline in the top-10 of his recently launched CF Woodford Equity Income fund, as well as leading Swiss pharmaceutical company Roche.

For investors looking for an alternative to the AXA Framlington Healthcare fund, Rathbone Unit Trust Management's Mona Shah tips the Polar Capital Healthcare Opportunities fund for direct exposure to the sector and the Legg Mason Clearbridge US Aggressive Growth fund for investors who don’t want to take a direct path to healthcare stocks.

“We are invested in Polar Capital Healthcare Opportunities in our Total Return portfolio,” Shah said, “having benefitted from our exposure in 2013.”

“In the US, the Legg Mason Clearbridge US Aggressive Growth fund is an interesting idea for anyone wishing to participate in this theme in an indirect way, as it has a structural bias to the sector.”

The five-crown rated Polar Capital Healthcare Opportunities fund also sits in the IMA Specialist sector, but the fund has actually outperformed the AXA portfolio over the last three years.

The Dublin-domiciled fund, run by healthcare experts Dan Mahony and Gareth Powell, made 112.44 per cent over the last three years, well ahead of the MSCI World Health Care index, which picked up 70.43 per cent. The AXA fund made 62.88 per cent over the period.

Performance of funds vs index over 3yrs

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Source: FE Analytics

As Shah mentioned, the fund is directly exposed to some of the leading healthcare stocks around the world, though the majority of the fund’s holdings are based in the US. More than 70 per cent of the portfolio is invested in the country.

Among Polar’s top holdings are Swiss pharmaceutical leader Roche and Germany-based Bayer, but there are also a number of smaller holdings like Chicago-based research biopharmaceutical firm AbbVie and global medical device company St Jude Medical.

Rathbones aren’t the only fund house backing Polar Healthcare Opportunities. Fund of fund managers at T.Bailey hold the sterling-denominated portfolio in both their Growth and Dynamic portfolios while S&W Smithfield holds the US dollar-denominated version.

Polar Capital Healthcare Opportunities has clean ongoing charges of 1.24 per cent.

For indirect exposure, Shah and the fund of funds team at Rathbones tip the Legg Mason Clearbridge US Aggressive Growth fund for its bias toward the healthcare sector.

Run by Evan Bauman and Richie Freeman, the five-crown rated fund seeks to generate long-term capital appreciate by investing in listed US companies they think will experience above average growth of earnings and cash flow.

The $2.8bn fund has a long track record of outperforming both the IMA North American sector and the Russell 3000 Growth index – unusual, given how difficult it has proven to outperform in the highly researched US market. Over the last 12 months, the fund has more than doubled the returns of its peers, picking up 13.81 per cent.

Over the last decade, the fund is up 159.51 per cent while the index is up 142.68 per cent. The sector made just 109.63 per cent over the period.

Performance of fund vs sector and index over 10yrs


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Source: FE Analytics

As Shah highlights, the largest single portion of the fund is invested in healthcare stocks, with the sector making up 32.85 per cent of the portfolio.

Among its top-10 holdings are global biotechnology company Biogen Idec, which specialises in therapies for the treatment of neurodegenerative, hematologic and autoimmune diseases, and UnitedHealth Group, which is a diversified managed health care company headquartered in Minnesota.

Rapidly growing Forest Laboratories, a US-based pharmaceutical company, is also in the top 10 holdings, as is Vertex Pharmaceuticals, which focused on drugs to treat viral infections, inflammatory & autoimmune disorders and cancer.

The fund is also remarkably consistent, having been one of the only funds in the IMA North American universe to beat the sector in each of the last five calendar years.

Rathbones hold the Legg Mason fund in the top 10 of their Rathbone Multi Asset Enhanced Growth portfolio. The CF Lorimer Trust is also backing the fund in their top holdings.

Legg Mason ClearBridge US Aggressive Growth has ongoing charges of 1.78 per cent.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.