All of this came in context of the the US House of Representatives finally approving a long-awaited and controversial Healthcare Reform Bill. Unanimously rejected by the Republicans in the House, it is intended to provide medical cover to tens of millions of uninsured Americans, and was a key part of president Obama's election campaign.
Following the FTSE's lead, pharmaceutical stocks were among the top gainers trading on the Dow on opening in New York. Companies such as Merck & Co and Pfizer were up 0.95 per cent and 0.77 per cent by 2pm GMT.
The question remains, however, as to what lies in store for investors with exposure to North America and to the general healthcare sector including biotech companies.
Financial Express data suggests there are 346 IMA funds with exposure to North America and to the healthcare sector. Of this, 14 funds have a 20 per cent or more weighting to the healthcare sector.
| Fund | Sector weighting for Healthcare |
Area weighting for North America |
| L&G - Global Health & Pharmaceutical Index - Nov 00 (LF21) | 98.50 | 58.20 |
| Franklin Templeton - Franklin Biotechnology - Jul 00 (UJ84) | 95.91 | 86.46 |
| AXA - Framlington Health - Jan 95 (FR45) |
95.23 | 74.84 |
| Schroder - Medical Discovery - Jun 00 (QA79) | 93.08 | 59.08 |
| AXA - Framlington Biotech - Dec 01 (FR15) | 85.37 | 71.35 |
| CF - Greenwich - Jan 04 (RK31) |
45.00 | 100.00 |
| Thornhill - American - Jan 95 (TH02) | 36.54 | 97.64 |
| CF - Westchester - Jan 02 (OP17) |
35.46 | 98.12 |
| Neptune - US Max Alpha - Dec 08 (DXC2) |
25.90 | 90.40 |
| JPM - US Smaller Companies - Jan 95 (HX38) | 25.70 | 100.00 |
| Invesco Perp - European Opportunities - Dec 07 (AUT3) | 22.40 | 1.80 |
| Franklin Templeton - Franklin US Opportunities - Feb 09 (EHB0) | 20.51 | 97.28 |
| Franklin Templeton - Franklin US Equity - Sep 03 (FT61) | 20.05 | 89.58 |
Source: Financial Express Analytics
The fund with the largest sector weighting and area exposure is the Franklin Templeton Franklin Biotechnology fund. It is 95.91 per cent weighted to healthcare and 86.46 per cent exposed to North America. Its top ten holdings include drug therapy manufacturer Celgene Corporation, Gilead Sciences and Onyx Pharmaceuticals.
The AXA Framlington Health fund also has high weightings to both, with 95.23 per cent exposed to the healthcare sector and 74.84 per cent held in North America. Managed by Deanne Donnigan, its top ten holdings include US health insurance company UnitedHealth group, HMS Holdings and Alexion Pharmaceuticals.
Donnigan says the healthcare sector has been out of favour with this overhang and believes as a result there will be some short term relief in equity markets, but also says there will be some induced volatility as dissenting senators have their turn on the soap box.
"I don’t think news from [Sunday] night is priced in, healthcare remains an underweight in many portfolios and its weighting in the S&P 500 for instance is half of what is has been in better times for the sector - 6.8 versus 11-13 per cent," she says.
"We have been positioned for healthcare reform for the last two years so there are no major changes recently other than some exposure to hospitals, seen as beneficiaries, and insurers, with a valuation call as the market was written off as dead business due to reform.
"Otherwise we remain invested in what we see as innovative and breakthrough products as we see these as a way to reduce risk on both a pricing and regulatory front."
Variations in healthcare risk
Geoffrey Hsu, manager of the closed ended Biotech Growth Trust agrees the overhung has had an affect on the market.
"All in all we are glad this is done finally, I think the uncertainty with regards to healthcare reform really weighed on the sector in 2009. I think with that overhung removed the sector can start performing again,” he says.
"The impact of the healthcare reform was unnecessarily affecting the stocks that really didn’t have as much exposure to the reform, such as pharmaceutical and biotech stocks. Hopefully with this overhung removed people will realise that the prospects of these stocks will not be damaged and this will enable the sector to perform well."