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Fund Profile

Disclaimer

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.

Overview
BBH could be poised for strong performance as the rate cycle eases…
Overview

Bellevue Healthcare (BBH) is an actively managed healthcare fund with an investment strategy that aims at harnessing the exponential growth potential of companies in the sector. Managers Paul Major and Brett Darke look to identify those businesses that can contribute to solving structural problems in creaking developed-world health services, and run a concentrated, highly active portfolio with a structural overweight to small- and mid-caps.

The portfolio saw a sharp bounce of outperformance in late 2023 as markets appeared to conclude that a peak in the interest rate cycle was in sight. This follows a sustained period in which growth and small-caps have both been out of favour, thanks to the pressure from rates and the potential recession (see Performance). Yet the managers argue the portfolio is still looking very cheap compared to history when factoring in the high growth expected, and earnings have been resilient, as they tend to be in the more defensive healthcare sector. While they have moderated their Gearing somewhat, and remain wary in the very short term, Paul and Brett think a new period of outperformance for growth and for mid-caps could be on the horizon as rates decline.

The trust pays a dividend worth 3.5% of the NAV from capital where necessary, based on the NAV at the previous fiscal year end, and currently has a prospective Dividend yield of 3.5%.

The shares trade on a 5.9% Discount at the time of writing. The board has invested significant amounts of cash in buying back shares, while there is also an annual redemption facility offering an exit close to NAV.

Analyst's View

BBH offers access to some exciting trends with the potential to deliver strong shareholder returns. Paul and Brett have a detailed view of the key issues facing healthcare systems and have built a portfolio full of companies offering a wide variety of solutions in a broad range of areas. This is unashamedly a growth fund, and history suggests the return target of 10% p.a. is deliverable. However, the managers are very risk-conscious in their approach, and this comes through in a number of ways. These include the tactical use of gearing, the reticence to follow the market into fad stocks, the attention paid to the valuation of individual companies, as well as the importance placed on diversification. We think all this adds to the appeal of the fund as a long-term holding.

The cautiousness comes through in the managers’ current outlook too. While they think the groundwork has been dug for a renewed focus on growth equities, they are conscious that volatility is quite likely to remain high. While they argue the valuation decline in the high-growth mid-caps versus the lower-growth large-caps has been significant, they note it is easy to be burned by being too early.

However, while this may be a strong rationale for holding off on gearing, we think for long-term potential shareholders, this could be a good time to get exposure. The rate cycle certainly seems to have peaked, and we would argue that even just the removal of the risks of rate hikes should itself create the prospect of a rally. Additionally, the mid-single-digit discount offers some comfort for prospective shareholders, particularly considering the commitment made by the board to keeping it in check via buybacks and a redemption facility.

Bull

  • High growth potential with areas of concentration potentially set for a rebound
  • Specialist managers with long experience in the sector
  • Strong commitment to managing the discount

Bear

  • An active approach increases the potential for underperformance as well as overperformance
  • Gearing increases downside risks as well as return potential
  • Focus on a single sector and dominance by one country (the US) brings specific risks
Continue to Portfolio

Fund History

28 Mar 2024 Healthcare, UK valuations, and renewables
We take a look back at the final week of our ISA event…
21 Mar 2024 Fund Analysis
BBH could be poised for strong performance as the rate cycle eases…
20 Mar 2024 How to grow old gracefully (and preferably rich)...
Ahead of the final week of our event, focused on retirement planning, we consider some of the complexities of portfolio construction…
05 Mar 2024 Results analysis: Bellevue Healthcare
Reviewing a tough financial year, but the last three months give grounds for optimism...
23 Feb 2024 An underrated edge
Company meetings give managers a level of access that is difficult for individual investors to obtain…
20 Feb 2024 Waiting for the world to change
Closed-ended trusts are a simple way to access the attractive income and defensive potential of renewables infrastructure…
25 Mar 2024 Bellevue Healthcare
Paul Major
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
26 Jan 2024 Heading to the polls
We look at elections around the world and what they mean for investors…
03 Jan 2024 Probably better asking an octopus
Our investment trust experts uncurl a tentacle each and choose their ‘top picks’ for 2024…
15 Dec 2023 Do obesity drugs have short legs?
BBH’s portfolio seems to offer stronger fundamentals than the hype elsewhere would suggest…
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?
29 Sep 2023 Healthy fundamentals
Healthcare and biotech are out of favour despite the secular growth trends supporting them…
15 Sep 2023 Pizza Tiger
You don’t need to reinvent the wheel to deliver good returns on your investment...
23 Aug 2023 Halfway there…investing on a prayer
We provide an update on our picks for 2023 and see which analysts' prayers are being answered…
04 Aug 2023 Not going away
Macro volatility won’t change a key long-term driver for Bellevue Healthcare...
20 Jul 2023 Video interview with BBH Manager Paul Major on M&A, buy opportunities and more
We look at whether 2023 is still a 'historic opportunity' to invest in healthcare...
30 Jun 2023 Fund Analysis
BBH offers a very differentiated way to invest in the bombed-out healthcare sector…
05 May 2023 Is it time to buy healthcare?
Macro fears seem to have crimped valuations, despite the sector’s long-term growth prospects…
06 Mar 2023 Results analysis: Bellevue Healthcare
A rare discount may prove interesting to long-term investors in BBH…
20 Feb 2023 Podcast: Trust Issues #11 - Why healthcare valuations are low
We speak to Bellevue Healthcare manager Brett Darke about the state of the healthcare sector...
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…
09 Dec 2022 Why healthcare stocks are here to stay
It’s been a volatile couple of years but that looks unlikely to stop tailwinds boosting the sector…
10 Nov 2022 Fund Analysis
BBH is resolutely aligned to the long-term growth tailwind of healthcare demand…
12 Jul 2022 Results analysis: Bellevue Healthcare
BBH’s managers appear resolute in their conviction, despite a challenging period for performance…
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...
View all

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