Fund Profile


Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Bellevue Healthcare. 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.

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BB Healthcare Trust (BBH) is a highly actively managed trust, seeking to exploit a long-term secular growth theme. The managers (Paul Major and Brett Darke) invest in a concentrated portfolio of companies providing new approaches to transform what they view as fundamentally broken healthcare systems around the world.

Using the closed-ended structure, Paul and Brett aim to take a longer-term view than the market. That said, the pandemic has shone a light on trends that they have long thought likely to emerge. As we discuss in the Portfolio section, the experience of seeing a GP during lockdown shows the potential for the NHS to save significant amounts of money on ‘digital first’ consultations, illustrating how models of care might soon shift very significantly to the benefit of many of BBH’s portfolio companies.

That said, the managers’ valuation-aware approach to growth investing means they are currently cautious, as evidenced by the portfolio’s defensive positioning and cash levels of c. 9% (see Gearing). The team believe capacity on the supply side (especially elective operations that can be easily delayed without risk to the patient’s life such as hip or knee replacements), and a longer time than people expect to ‘return to the norm’, will lead to some companies’ revenue and earnings expectations being revised down over the near term.

BBH targets a Dividend payout equal to 3.5% of the prior financial-year-end NAV. This dividend is funded from capital reserves, and the current target of 6.03p equates to a dividend yield of 3.2%. The strong Discount control mechanism (an annual redemption option every November), as well as good demand for the shares, has meant BBH’s shares usually trade close to NAV. It has been issuing shares this year, meaning we expect the ongoing Charges to be marginally lower this year than last year’s 1.19%.

Analyst's View

BBH’s managers, Paul and Brett, are specialists in what is a complex field. It is an area of the market that in our view offers highly attractive secular growth opportunities, which are likely to prove resilient and to some extent unlikely to be derailed by the economic cycle. The team employ a highly active approach to stock-picking on a global basis, with a very concentrated portfolio.

As we discuss in Performance, returns since the December 2016 IPO have been strong, and are ahead of the trust’s twin objectives. Despite the various macro headwinds all investors had to contend with, 2020 saw a continuation of this strong performance, with BBH performing significantly ahead of the benchmark and its directly comparable investment trust peers, which we think amply demonstrates the resilience of the strategy even in the most challenging of market conditions.

In our view, the differentiated investment approach and highly concentrated portfolio have been key contributors to this sustained success, but also add to risks. The statistics bear this out; whilst BBH’s NAV volatility has been higher than peers (making it more suitable for long term investors), the superior Sharpe ratio demonstrates that the managers have used this extra volatility to good effect for investors.

Aside from performance, BBH has several shareholder-friendly features including low discount volatility, high dividend security and a simple and transparent fee structure. Over the short term, BBH’s positioning arguably offers an interesting exposure to benefit from a post-pandemic recovery, without the risks that other ‘defensive’ sectors (such as consumer cyclicals) present.

Highly differentiated offering, with highly active approach
Narrow focus, and concentrated portfolio presents risks relative to more diversified portfolio
Strong track record, added to over 2020
Dividend based on NAV, which means that if the NAV falls year on year, it could mean a decline (although the board could choose not to pay a lower dividend)
Attractive dividend yield (albeit paid from capital)
Potential to gear, combined with concentrated portfolio, can translate into high NAV volatility
Continue to Portfolio

Fund History

28 Jun 2022 Podcast: 2022's historic opportunities for healthcare investors
We speak to Paul Major, Portfolio Manager of Bellevue Healthcare...
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...
25 Mar 2022 Slides and Audio: BB Healthcare
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 17 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
07 Mar 2022 Fund Analysis
BBH’s discount has widened, and the managers' increased gearing shows their confidence in prospects…
01 Mar 2022 Results analysis: BB Healthcare
The team behind BBH are bullish on the long-term outlook and gearing up after big falls in share prices among healthcare stocks…
22 Feb 2022 Gearing up for recovery
The team at BB Healthcare think the continuing market rout for growth equities has created a fantastic opportunity for investors brave enough to weather the ongoing storm…
24 Dec 2021 Short term pain, long term gain
The team behind BB Healthcare Trust think the chaos being caused by the Omicron variant could create opportunities for long term investors…
10 Nov 2021 Fantastic growth funds (and where to find them)
We found them in India, Japan, frontier markets, healthcare and the global sector – and here they are…
10 Nov 2021 Slides and Audio: BB Healthcare
Download the presentation and listen to the audio from our 'Fantastic growth funds (and where to find them)' conference on 4 November...
01 Oct 2021 Things can only get better (and they will)
The team at BB Healthcare see brighter days ahead despite the best efforts of a sensationalist media to make it feel like doomsday…
09 Sep 2021 Fund Analysis
“Rarely better exposed to higher quality or more transformational science”...
30 Jun 2021 The long (and short) of future healthcare
We examine the implications of demographic change for investors...
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…
04 Mar 2021 Slides and Audio: BB Healthcare Trust
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 03 March...
02 Mar 2021 Results analysis: BB Healthcare Trust
After another set of strong results, we look at how BBH has positioned itself for another year of outperformance…
10 Feb 2021 Fund Analysis
BBH is a potentially interesting addition to growth portfolios and for investors looking for income...
09 Jul 2020 The next big thing: two mega-trends that everyone should own
Tech seems to beat every other sector hands down – in both up and down markets – but nothing lasts forever. Where else should investors be looking for secular growth themes?
17 Jun 2020 Fund Analysis
BBH has a differentiated approach to a secular-growth theme...
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