Fund Profile

International Biotechnology 12 December 2019

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by International Biotechnology. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

International Biotechnology Trust (IBT) has delivered a solid performance of 14.3% in NAV terms this year and grown its dividend by 4.1% in the face of difficult conditions for biotech companies.

Volatility in broader equity markets – spooked by fears of a trade war, the Brexit debacle, and tensions in the Middle East – has not helped biotech, which tends to perform poorly in ‘risk off’ environments, but IBT’s unquoted portfolio, a unique feature of the trust, has lent considerable support to NAV returns during a period when the listed portfolio has struggled.

Read more about how the unquoted portfolio has helped support IBT’s returns…

The trust’s decision to pay out 4% of NAV annually in the form of dividends, drawn entirely from capital, continues to pan out well for investors who have seen a full year dividend of 28p in 2019, up 4.1% on last year’s payout and more than 20% higher than the dividend in 2017. In yield terms, the trust stacks up strongly even against trusts designed specifically for income investors – with a higher yield than the average trust in the UK Equity Income sector – and the trust’s discount has narrowed sharply on the back of steady demand for its shares since the income commitment was introduced.

Read more about IBT’s discount and new share issues…

2019 has been a bumpy ride for biotech investors with gains made in the first half lost in the autumn, before a sharp rebound in October. Healthcare is a traditional football for all candidates in the run up to a general election in the United States, so more volatility is not unlikely. The managers say prices are depressed relative to other S&P sectors, but think the fortunes of the sector could improve ahead of the US election as the market begins to realise the extent to which valuations are depressed.

In our view the biotechnology sector has significant tailwinds behind it, and this trust is well set up to benefit from them whilst avoiding the worst of the volatility which tends to torment investors in more ‘risk on’ sectors like this. The trust’s unique focus on avoiding binary risk events has helped it to avoid a number of ‘blowups’ which have affected its rivals, and its unique unquoted portfolio is already proving its worth, with an average yearly internal rate of return (IRR) of 16% despite the venture fund being only 70% invested at this stage. Expected distributions from the fund mean that IBT will only need to make limited cash contributions going forward to meet its commitment.

Read our view on the trust and its core strengths…

Kepler View

IBT offers a differentiated source of income, but also one that beats that available from the average trust in the UK Equity Income sector. At the same time, IBT has a strong track record of long-term capital growth.

We believe that there are two clear long-term tailwinds behind biotechnology as a profitable area for investors. Firstly, there is an element of ‘Moore’s Law’ involved; technological advances in one area enable and multiply the opportunities to develop new technology and to find applications for it in other areas. Secondly the increasing wealth, age and quality of life which are to be found in the developing world provide significant and lasting opportunities for biotech companies. Many of biotech’s products, in aging developed market populations, are much more of a must-have than the latest iPad or consumer fad.

The managers say next year’s US general election is likely to cast a pall over demand for biotech stocks, and price/earnings ratios reflect this sluggish environment. But, far from being dejected the managers see this as a significant opportunity to buy good companies at depressed valuations and expect a rebound like the one we saw after a bear market for biotech in the run-up to the 2016 US general election.

Against this backdrop we think IBT is well positioned. We particularly like its strategy of mitigating risk by diversification across sub-sectors, selecting therapeutic areas with defensive characteristics, avoiding large ‘elephants’ accounting for any more than 10% of the portfolio, and avoiding binary events (i.e. divesting stock as companies approach the announcements of the results of crucial trials, even if this means missing out on the last few yards of upside). The unquoted portfolio adds another powerful layer of differentiation and has made a valuable contribution to returns this year.

bull
bear
A highly experienced manager with a proven track record of outperformance, who is supported by a strong and specialised team
Biotech stocks could remain somewhat torpid in 2020 as the US presidential election gets underway and healthcare, as usual, becomes a topic of hot debate
Offers a solid yield and good prospects for capital growth
Biotech stocks tend to exaggerate volatility in other sectors, and so are vulnerable to wild swings during ‘risk off’ periods when investor sentiment is volatile
A risk-focused investment process sees the trust divest from companies as they approach ‘binary risk events’ like drug trials, which shields it from the worst excesses of volatility

Continue to Portfolio

Fund History

08 Nov 2024 Monthly roundup: the budget’s impact, DGN's strategic review and our podcasts & results highlights
Jo and Ryan discuss the latest news, reviews and interviews in the investment trust world...
05 Nov 2024 Results analysis: International Biotechnology Trust
IBT continues to outperform its index, showcasing the benefits of active management…
01 Nov 2024 How will the US election impact biotechnology?
How the biotech sector may fare in different election outcomes...
03 Jul 2024 A really great stockmarket, the best, some tell me the best they’ve ever seen
US equities should be the bedrock of any diversified portfolio…
19 Jun 2024 None in, one out
We ask why companies are disappearing from public markets, and if it matters…
04 Jun 2024 IBT gains 3% from M&A deal
M&A remains strong in the biotech sector...
08 May 2024 Results analysis: International Biotechnology Trust
IBT continues to deliver outperformance, now as part of Schroders...
18 Mar 2024 IBT’s managers pass three-year milestone well ahead of peers
Ailsa Craig and Marek Poszepczynski have delivered strong outperformance of index and peers over three years…
18 Mar 2024 Fund Analysis
Ailsa Craig and Marek Poszepczynski are celebrating their first three years as managers of IBT…
13 Mar 2024 Roller coaster ride
Thematic funds have seen significant outflows over the past two years…
01 Mar 2024 Behind the trust: International Biotechnology Trust plc
Biotech companies stand to inject high returns and positive social impact into an investor’s portfolio and International Biotechnology Trust has an impressive track record of doing this with lower volatility than the index (NASDAQ Biotechnology Index), while paying a healthy dividend yield...
27 Feb 2024 Talking Trusts: An introduction to investing in biotech with International Biotechnology Trust
We talk about what IBT offers for investors looking for exposure to the biotech sector…
19 Mar 2024 International Biotechnology Trust
Ailsa Craig & Marek Poszepczynski
Rewatch this webinar as part of our month-long online series 'Themes for your ISA in 2024' hosted by the team at Kepler Trust Intelligence throughout March...
Watch Recording
10 Nov 2023 Results analysis: International Biotechnology Trust
IBT has delivered strong outperformance in a tough environment...
08 Nov 2023 Small cap healthcare stocks look cheap
The success of weight-loss drugs shouldn’t be taken for granted…
18 Oct 2023 Computer says no
Markets are fixated on replacing humans with AI, rather than maintaining them with biotech. Could this be an opportunity to rotate profits?
28 Sep 2023 A biotech bounce back? With IBT Manager Ailsa Craig - Podcast: Trust Issues #22
We talk the move to Schroders, managing risk, and reinvesting the proceeds of M&A activity...
15 Sep 2023 Fund Analysis
IBT managers’ unique approach set to continue at Schroders…
03 Aug 2023 Flash Update: International Biotechnology Trust
IBT moves to Schroders, with no change to team or process and the prospect of lower costs over time…
03 May 2023 Results analysis: International Biotechnology Trust
IBT maintained its strong performance into the first half of its financial year…
23 Mar 2023 The first course: week one of our ISA event in review
We look at the first four presentations of our ISA season event…
09 Mar 2023 International Biotechnology Trust - Harnessing healthcare for growth and income
Ailsa Craig & Marek Poszepcynski
Rewatch this webinar from our month-long online series 'A feast of ideas for your ISA' hosted by the team at Kepler Trust Intelligence throughout March...
Watch Recording
15 Feb 2023 Flash Update: International Biotechnology Trust
IBT has flagged an upcoming change to its management arrangements…
20 Jan 2023 Podcast: Trust Issues #8 - Biotech investing in 2023 with IBT managers
Ailsa Craig and Marek Poszepczynski update us on goings on in the biotech industry...
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
04 Jan 2023 Here we go again
We review our ‘top picks’ for what was a wild year and place our bets for the year ahead – which doesn’t look much calmer…
28 Dec 2022 Calling time
As the year draws to its close, our analysts highlight the articles they think are the team’s best calls from 2022…
12 Oct 2022 Fund Analysis
Attractive valuations in a sector with strong long-term secular growth...
20 Jul 2022 Ingredients for success
We identify several less conventional trusts that offer strong sources of diversification to major indices…
31 May 2022 Five alternative trusts for income investors
Slides and audio from our event last week, featuring five trust managers discussing different strategies to deliver income for shareholders in challenging market conditions...
27 May 2022 Slides and Audio: International Biotechnology
Download the presentation and listen to the audio from our 'Alternatives for income investors' virtual week from 25 May...
14 Apr 2022 The inevitabilities: death and taxes
Biotech has had a rough ride lately but, as the world gets older and richer, our analysts think long-term secular growth is inevitable…
30 Mar 2022 You say tomato…
Do it yourself or put it into a global fund and leave it to the experts - our analyst debate the merits of each approach...
30 Mar 2022 Fund Analysis
IBT’s managers appear confident that valuations are increasingly attractive…
08 Dec 2021 Further cancer breakthroughs hinge on biotech investment
By Marek Poszepczynski and Ailsa Craig, co-investment managers of the International Biotechnology Trust...
13 Oct 2021 Fund Analysis
IBT remains differentiated to peers, offering exposure to the explosive potential of innovation in healthcare...
28 Jul 2021 How are the mighty fallen
Dividend culture as we knew it is dead, according to Kepler's David Johnson, but investment trusts offer a solution...
20 May 2021 Fund Analysis
IBT has had a change of management - but no change of strategy…
07 Apr 2021 Paging Dr Alpha
The pandemic has boosted secular growth drivers behind healthcare as an investment theme...
10 Mar 2021 Spring Conference '21
Audio and presentations from 21 of the UK’s leading investment trust managers…
08 Mar 2021 Slides and Audio: International Biotechnology Trust
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 03 March...
04 Jan 2021 Fund Analysis
IBT offers a differentiated way to access strong growth prospects at an undemanding valuation...
30 Sep 2020 Slides and Audio: International Biotechnology
View the presentation and listen to the audio from our 'Alternatives for Income Investors' event on 29 September...
26 Aug 2020 Trump v. Biden
Two of our analysts debate who will win the US election and what that means for markets…
09 Jul 2020 The next big thing: two mega-trends that everyone should own
Tech has beaten almost everything hands down – but nothing lasts forever. Where else should investors be looking for secular growth themes?
08 Jul 2020 Fund Analysis
IBT offers a differentiated exposure to a secular growth theme complemented by a solid yield…
25 Jun 2020 Selling the family silver
Is there something fishy about a trust paying dividends from capital?
27 Feb 2020 Robbing Peter to pay Paul?
Two of our analysts discuss the growing trend for companies to pay an income out of capital…
12 Dec 2019 Fund Analysis
A highly experienced management team and a flexible portfolio of quoted and unquoted biotechnology stocks, with a yield target of 4% of NAV...
29 May 2019 Fund Analysis
We discuss the opportunity as biotech stocks trade at record low valuations, despite strong prospects for the sector...
03 May 2019 A steady hand
Chairman of International Biotechnology Trust, John Aston, explains how his unusual background in both biotechnology and banking come together on the trust...
15 Apr 2019 Art meets science
Carl Harald Janson explains how his experiences in science and business blend seamlessly in his management of International Biotechnology Trust...
06 Feb 2019 Income for the long haul
With 'ISA season' looming we identify investment trusts which offer long-term, dependable income streams for yield-hungry investors...
31 Oct 2018 The Trump effect
Two years after the shock election of Donald Trump, we take a look at what the Trump administration has really meant for US markets and the trusts that invest in them...
10 Oct 2018 Fund Analysis
Five years on from the appointment of a new manager, this US-focused biotech trust has seen its fortunes transformed...
22 Aug 2018 Reassuringly expensive?
Some investment trust premiums have been stretched to eye-watering levels. Have investors been enjoying themselves in the sun too much? We try to rationalise current levels and suggest alternatives...
22 Mar 2018 Fund Analysis
A well-resourced biotechnology fund that has produced annualised returns of +18% under the current manager, offering a yield of 4%...
22 Mar 2018 The search for discounted yield
We scour the investment trust universe for trusts offering chunky yields on a discount...
09 Jan 2018 The Income Diversifiers Conference
CPD certificate, speaker presentations and slides...
27 Sep 2017 Winners and losers from tomorrow’s world
Searching for the Tesla of tomorrow…
27 Sep 2017 Not the usual suspects...
As equity valuations continue to defy logic, we identify the trusts least correlated to their fortunes...
25 Sep 2017 Fund Analysis
Proven alpha generation from a strong management team, low correlation to mainstream equities, and a yield of 4%...
08 Jun 2017 The doctor will see you now...
Carl Harald Janson, once dubbed 'the world's best biotech manager' by Bloomberg, tells us what he thinks lies in store for the sector...
21 Feb 2017 Don't wanna be an American idiot
We highlight various routes to US exposure for those who are not sure how much faith they place in the 'Trump Bump'...
17 Nov 2016 Fund Analysis
16 Nov 2016 Fortune favours the brave
Our analysis shows that technology trusts are far less risky than the returns they have generated suggest...
View all

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