Why I like the idea of a healthcare investment trust

Healthcare is an area where I expect to see resilient and indeed growing demand in the long term. When it comes to taking care of their health, many people are willing to spend a lot of money if they have it. So the area can be lucrative.

But without medical expertise myself, it can be hard to assess the attractiveness of some healthcare shares. That is why an investment trust appeals to me, as I can hopefully benefit from a diversified range of investments chosen by a professional manager.

Looking down the list of Worldwide Healthcare’s five biggest holdings at the end of July, I see such familiar names as AstraZeneca, Bristol-Myers Squibb, Humana, and Roche. A lot of the trust’s focus is on pharma companies and healthcare suppliers. So by investing in a trust like this, I ought to be able to get diversified exposure to the healthcare sector.

The Worldwide Healthcare Trust share price has fallen

However, although I like the idea of buying shares in a healthcare-focussed investment trust, is this the right one for me? After all, the recent share price performance has been weak and the dividend yield is below 1%.

Over the past five years, the performance looks better. The Worldwide Healthcare Trust share price moved up by 26% in that period. That is a decent gain in my view, though not remarkable. During that timeframe, for example, AstraZeneca has moved up 119%. But investing in one share would not have given me the diversification of an investment trust. AstraZeneca has done well in recent years, but some of its competitors performed far worse.

The long-term trend for the shares has been positive, although some years have seen better performance than others. In 2019, for example, the Worldwide Healthcare Trust share price saw a 32% jump. So although I do not expect this investment trust will ever match the performance of the best individual healthcare shares, I am hopeful it could give me a balance of diversified healthcare exposure and long-term growth.

My move

I would like to get some exposure to the healthcare sector for the long term. I see some advantages to doing that by buying shares in an investment trust. At the end of July, this particular trust was trading at a discount to its net asset value of less than 3%. Many pharma shares have what I regard as high price-to-earnings ratios right now. So I do not see the Worldwide Healthcare Trust share price as a bargain. It basically looks fairly priced for what it is to me.

But I would still consider investing some of my money in its shares as a way to participate in what I see as the long-term growth prospects of the healthcare sector.

The post Down 15%, is the Worldwide Healthcare Trust share price a bargain? appeared first on The Motley Fool UK.

Refreshingly robust

Drinks producer Britvic (LSE: BVIC) would be a go-to pick for me as a novice investor. It’s an easy-to-understand business that boasts big brands and operates in a defensive sector. The most recent trading statement helps back this up.

In the three months to the end of June, Britvic’s revenue came in at just over £431.1m. This was up 11.2% over the same period in 2021. I can’t help but feel the blistering weather conditions we’ve been seeing recently should make for another very decent quarter.

That said, one risk here is that the Robinsons brand owner may not be immune to the cost-of-living crisis. While consumers are generally resistant to switching away from what they know and love, this could become more common later in the year as energy bills soar. As a result, earnings may actually take a temporary dip.

Positively, I’m pretty confident this won’t affect Britvic’s ability to keep returning cash to its shareholders. A dividend yield of 3.4% this year, at the time of writing, is already expected to be covered twice by profit.

And by using this money to buy more shares, I stand to benefit even more when the good economic times return.

None more defensive

A second FTSE 250 share I’d buy as a novice investor would be Worldwide Healthcare Trust (LSE: WWH). As it sounds, this is actually a fund rather than a single company. It has holdings in some of the biggest pharmaceutical groups in the world, such as AstraZeneca, Bristol-Myers Squibb and Pfizer. These are not the sort of companies that are likely to go bust.

Why? Because there are few more resilient markets than healthcare. As incredible as progress in medicine and treatment has been in recent decades, we all need it sooner or later. As a new investor, I’d find this predictability comforting as I find my feet in the stock market.

It’s not all jam. The fact this is an investment trust run by humans rather than machines, which means the management fees are higher. A risk here is that this doesn’t guarantee better performance. In fact, it could lag the market return!

This brings me to my final point…

A safer alternative for FTSE 250 investing

The movement of share prices is impossible to predict in the near term. As a result, I would only ever invest in either of the above if I could deal with losing money, if only on paper, for a while. I’m a firm believer that true investing is about buying shares for years. It’s the Foolish way.

Then again, a cheap exchange-traded fund that tracks the return of the whole FTSE 250 index is another option. Yes, my money might grow at a slower rate. Nevertheless, it will be spread around 250 businesses operating in a vast number of different sectors (e.g. housebuilders, retailers and tech firms) and not just consumer goods or healthcare.

Regardless of experience, it always pays to consider my financial goals and risk tolerance before buying anything!

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Unique investment trusts 

A great example is the Allianz Technology Trust (LSE: ATT), which I would add to my portfolio to build exposure to the global technology sector.

Over the past five years, the trust has returned more than 300%, thanks to its exposure to high growth technology stocks such as Microsoft. 

Past performance should never be used to guide future potential and I think it is unlikely the trust will repeat this impressive performance over the next five years.

Nevertheless, as a way to build exposure to corporations like Microsoft and other more niche operators such as the cloud security company Zscaler, I think the trust looks incredibly attractive. 

Unfortunately, some investment trusts can be quite expensive ways to invest in the market. Most charge an annual portfolio management fee, and some even charge a performance fee if they exceed their benchmark return.

The Allianz Technology Trust charges both. These fees exceeded 3.6% in 2020, although the trust did return 80% compared to its benchmark return of 42%. In the long run, these high fees could eat into investor returns. 

Still, I am willing to pay a fee to investment trust managers who have experience in a particular sector. That is why I would buy this trust for my portfolio today despite the high cost. 

Healthcare sector champion 

Another trust I already own and would buy more of for my portfolio is the Worldwide Healthcare Trust (LSE: WWH).

This trust charges an annual management fee of just under 1%. It is managed by a team of experienced medical professionals who provide unique insight into the global healthcare sector. I am willing to pay for this experience, especially in such a specialist industry. 

As well as paying a performance fee, another downside is that I have no input over the investments chosen. This is both a good and a bad thing. I can outsource the investment decisions to those who know better, but it also means that if they pick the wrong investments, my hard-earned money is at stake. 

Despite this risk, I own the healthcare trust in my portfolio to build exposure to the sector and buy into the experience of its management team. Some of the top holdings in the portfolio include American pharmaceutical and healthcare giants such as Boston Scientific. This unique company manufactures devices for the international medical market. 

The portfolio also contains several speculative names, such as Mirati Therapeutics which is developing cancer therapies. These high-risk, high-reward opportunities are not the sort of businesses I would be comfortable buying myself. I am happy to let the management team at this investment trust take on the work. 

The post 2 of the best investment trusts to buy now appeared first on The Motley Fool UK.

Investment trusts are a great way to invest in the market quickly. They are actively managed investment companies that own portfolios of stocks.

This means it’s easy to buy one company and get exposure to a whole basket of different stocks spread across sectors and industries.

Buying trusts also enables investors to buy exposure to sectors or regions they may not necessarily be able to invest in themselves. 

Investment trusts to buy 

I think one stock market sector that will do well over the next few decades no matter what happens to the global economy is healthcare. According to current projections, global healthcare spending could hit $10trn by 2022, up from around $8trn in 2018. 

The US is by far the world’s largest market for healthcare spending, and this is where some of the best businesses are located. That’s why I’d buy the Worldwide Healthcare Trust (LSE: WWH) for a small portfolio of investment trusts. I already own this stock in my portfolio for the same reasons.  

This trust, as its name suggests, can invest all over the world. US stocks make up two-thirds of the portfolio, and 11% is in Chinese equities. The rest is spread around the world. The largest holding is Boston Scientific.

As well as its international diversification, the trust is also managed by a specialist healthcare investment manager, which can bring levels of experience to the table that I could not. 

The international diversification and specialist experience are the two reasons I would buy this for my portfolio of investment trusts. 

This approach might not be suitable for all investors because it requires a level of trust in the investment manager. If the investment manager makes poor investment decisions, the returns of the trust could suffer. Some investors may not be comfortable with this approach. 

Global growth 

The other firm I’d buy for my portfolio of investment trusts is JPMorgan Global Growth and Income (LSE: JGGI). 

Once again, this is a trust I already own and would happily buy more of.

JPMorgan’s offering invests in stocks around the world that its managers believe can generate outstanding performance. Its track record of finding these businesses is pretty good. Over the past five years, the stock has returned 118%. Its top holding at present is Google’s parent company, Alphabet. 

However, it does command a performance fee. Its managers are paid a performance fee of 15% if the trust outperforms its benchmark index. High-performance fees can eat away at returns, so many investors might not be comfortable owning the trust as a result. 

Still, I’m happy to pay managers a performance fee if they continue to achieve outstanding returns. As well as capital growth, the stock also supports a dividend yield of 3.2% at present. That’s why I’d buy this stock for my portfolio of investment trusts with £2k today. 

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It’s what you do with this money that can really make a difference to your retirement fortunes. Saving is just part of the puzzle. You’ve worked hard to earn your money, so your money should be working hard for you.

Save, then invest

The best way to get your money working is to invest. For example, over the past five decades, the FTSE 250 has generated an average annual return of between 7% and 9%. In comparison, today the highest interest rate on offer on cash savings is around 2%.

This performance gap makes a difference when you’re saving for the future. £1,000 invested at 2% will grow into just £2,700 over 50 years. However, if your money is earning 9%, £1,000 will become £88,500 over the same period. In other words, a few percentage points of returns could be the difference between achieving a comfortable retirement and having a nasty shock when it’s time for you to leave the workforce.

With this in mind, I have compiled a list of the five top investment funds that I believe can help you achieve the retirement you want.

There are hundreds of investment funds on the market at the moment, but I have chosen these in particular because I believe they offer the best exposure to vital global investment themes at the lowest cost. As they are mostly equity funds, they are only really suitable for investors with investment horizons of 10 years or more. A short-term bond fund might be more suitable for readers planning to retire in the next few years.

Ready-made portfolio

My first top fund pick is the LifeStrategy 60% Equity Fund. The last time I wrote about this at the beginning of March, I claimed that it was one of the best funds around for investors of all experiences due to its international exposure and ready-made portfolio. I continue to believe this is the case today.

Split 60/40 between equities and bonds, the LifeStrategy fund gives buyers a well-diversified portfolio at the click of a button and with charges amounting to only 0.22% per year, it is significantly cheaper to use this instrument rather than try to build a similar portfolio yourself. The fund invests in markets around the world through other tracker funds, so there’s no risk that the managers will make a bad stock pick.

As the global economy continues to expand, LifeStrategy should produce sturdy returns for investors for many decades to come.

Tech focus 

LifeStrategy should continue to do well as long as the global economy continues to grow. The one downside of the fund is that it lacks a specific focus. The Scottish Mortgage Investment Trust (LSE: SMT) on the other hand, has a heavy tech focus.

Managed by James Anderson since 2000, Scottish Mortgage’s portfolio is dominated by some of the market’s biggest and highest-profile tech stocks including Amazon.com as well as Chinese internet giants Tencent Holdings and Alibaba.

These companies have transformed the world over the past decade, and it is highly likely that they will continue to do so for many years to come. Technology is changing the world in ways few thought possible. It’s making investors extremely wealthy along the way. I believe anyone investing for the future should have some exposure to tech stocks, but in this rapidly changing sector, paying an experienced manager like Anderson to look after your money is probably the best solution.

Growing population 

One of the sectors reaping the benefits from technological advances is the healthcare sector. Medical technology is improving at a faster rate than ever before, helping tens of millions of people around the world. As the world grows, the demand for medical services is only going to expand, and this is why I believe the Worldwide Healthcare Trust (LSE: WWH) is worth adding to your retirement portfolio.

This £1.4bn trust has been managed by Sven H. Borho since 1995, an experienced healthcare investor, who’s investment skill has produced strong returns for investors. Worldwide Healthcare does what it says on the tin. The trust is invested around the world in healthcare stocks. From drugs sector giants such as Merck & Co to medical device manufacturers such as Boston Scientific and niche pharmaceutical companies like Edwards Lifesciences, this trust is a one-stop shop for healthcare investing.

The one downside is that it is a bit on the expensive side with an annual charge of 0.9%. That said, Worldwide’s total return of 148% over the past five years, compared to the biotechnology & healthcare benchmark return of 131%, shows it may be worth paying that little bit extra to access the team’s healthcare experience.

Bricks and mortar 

Property is one of the most stable long-term investments. The TR Property (LSE: TRY) fund is a great way to add exposure to this asset class to your retirement portfolio.

TR Property invests in both listed real estate investment trusts and physical property. What’s more, it isn’t just limited to the UK. Only 43% of assets are invested in UK property. The remainder is invested throughout Europe (including borrowings, total exposure is 113.2%). The largest holding, accounting for around 10% of assets is Vonovia SE, Germany’s leading nationwide residential real estate company managing 355,000 residential properties around the country.

With an annual management charge of 0.8%, TR Property will give you instant exposure to a global real estate portfolio. The dividend yield is 2.9%.

Global champions 

Bankers Investment Trust (LSE: BNKR) is my fifth and final pick. I’ve picked Bankers because it has a record of creating value for investors, with a low fee (0.45%) by investing in some of the world’s largest and most innovative companies. Also, unlike most of the other funds profiled, it supports a modest dividend yield of 2.1%.

Today, the top five holdings are BP, Apple, Microsoft, American Express and British American Tobacco, a broad selection of top performing companies from around the world. There are 191 holdings in the portfolio overall.

Over the past decade, this £1.1bn fund has produced a total return for investors of 180%, smashing its benchmark return (FTSE All-Share) of 94.5% over the same period. As the trust has already been in business since 1888, I’m almost certain this would make a great addition to any long-term investment portfolio.

The post Retirement saving: 5 funds that could give you a comfortable retirement appeared first on The Motley Fool UK.

Losing patience

After a blistering debut, his eponymous vehicle Woodford CF Equity Income has trailed its sector horribly, falling 13.4% over the last 12 months and his £650m vehicle Woodford Patient Capital Trust (LSE: WPCT) has done even worse, falling 15.1% over 12 months, against a 5.1% rise on the All Companies sector.

I hold his equity income fund and am staying loyal for now. As markets turn volatile, his focus on dividend-paying stocks could prove its merits, provided he avoids more reputation-crunching disasters such as doorstep lender Provident Financial. However, I also share Edward Sheldon’s concern that it has strayed away from its original intention.

Loss of trust

I never had much time for Woodford Patient Capital Trust, launched in April 2015, which saw the dividend hero stray into uncharted (for him) small-cap territories, presumably hoping his reputation would see him through. Instead, his reputation has been sunk.

In the early, heady days this trust traded at a premium of as much as 4%, but today it is at a deep discount of 9.59% as investors lose heart. It has also changed tack, taking on more risk rather than less. Solid FTSE 100 companies have been ditched, while the limit on unquoted companies has been enlarged from 60% to 80%, as GA Chester points out here.

Almost half of the fund is invested in just six stocks, with its biggest holding Oxford Nanophore making up a whopping 10.1% of the fund (and down 54% over three years). The next five, Prothena, Purplebricks, Benevolent AI, Immunocore A and Proton Partners International are all at the higher end of the risk scale. This would be fine if the trust was shooting out the lights like so many smaller company funds right now, but it isn’t.

Rude heath

If you want to invest in smaller biotechnology and healthcare stocks, I would suggest an investment trust that has a proven long-term track record in this area, the Worldwide Healthcare Trust (LSE: WWH) launched in April 1995.

If you had invested your full allowance in the fund every year since 1999 you would now have a whopping £794,856, according to the Association of Investment Companies. It is up 28.7% over the last three years, Trustnet shows (which looks even more impressive when set against Woodford’s double-digit loss), and 152% over five years.

Global spread

Worldwide Healthcare Trust invests in a diversified portfolio of global pharmaceutical and biotechnology stocks for capital growth. It uses gearing and derivative transactions to enhance returns and mitigate risk, and holds a wider spread of stocks including established names such as Merck & Co (its top holding at just 4% of the portfolio), Novo Nordisk and Bristol-Myers Squibb

Worldwide Healthcare Trust isn’t directly comparable to Woodford’s UK-focused fund, with roughly two-thirds invested in North American equities, and holdings across Europe, emerging markets and Asia Pacific. It is in demand, trading at a slight premium of 0.94. Woodford may have lost his admirers but this fund certainly hasn’t.

The post Why I’d shun Woodford Patient Capital Trust and buy this super investment trust appeared first on The Motley Fool UK.

Private equity

Private equity has been one of the best-performing alternative asset classes in recent years, and that’s helped to attract billions in flows from sovereign wealth funds, pension companies and other institutions. It’s an area that’s largely closed off to direct retail investors, but there are a few investment companies, such as the HarbourVest Global Private Equity Limited (LSE: HVPE), which give them indirect access to this market.

What’s unique about private equity funds is that they typically invest in unquoted companies that are in the developing stage or have under-tapped potential. This means there’s the potential to generate higher returns than in the stock market, while improving portfolio diversification at the same time.

HarbourVest invests in a wide range of private equity funds which, in turn, gives it exposure to a broad-ranging portfolio of equity investments diversified by geography, stage of investment, vintage year, and industry.

And with a share price of 1,290p, HarbourVest trades at a 15% discount to its NAV, meaning prospective investors can effectively purchase shares in the fund for significantly less than the sum of its parts.

A healthcare fund poised for growth

Sector investing offers targeted exposure to company stocks in individual industries which can help you to pursue opportunities which affect specific parts of the economy.

One sector which I’m particularly keen on is healthcare. The sector offers huge potential, as it benefits from a number of long-term structural tailwinds, which include an ageing global population, a growing middle class in emerging markets, and innovation in new drug development. Of course, not every company will perform well in a sector that is benefiting from long-term trends, which means it’s important to diversify and spread your capital over a reasonable number of companies.

But instead of just buying the likes of GlaxoSmithKline and AstraZeneca, why not diversify geographically to potentially boost returns and reduce risk? After all, healthcare is a global business, so you’re getting foreign exposure from domestically-based businesses anyway. What’s more, the US has many more publicly-listed healthcare companies than the UK, particularly in the biotech sector, which means avoiding international companies drastically narrowing your investment universe.

That’s why most funds investing in the healthcare sector typically have a global outlook. And one fund which has caught my eye recently is the Worldwide Healthcare Trust (LSE: WWH), which I reckon to be a smart bet on the sector.

Since its inception in 1995, the fund has proven leadership, having been continuously run by two specialist investment veterans, Samuel Isaly and Sven Borho. Performance figures for the past five years show the trust earns a total share price return of 211%, easily beating its benchmark MSCI World Health Care Index’s performance of just 131% over the same period.

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