Healthcare is one of the best sectors in US equities as companies have shown resilience despite growing political noise, according to Citywire + rated Charles Somers.
Somers, who runs the recently overhauled Schroder ISF Global Demographic Opps fund, said there were several firms outside the main pharmaceutical space which were benefiting from the ability to limit costs.
‘Over a number of years we've had a substantial overweight in the healthcare sector, even as it has ebbed and flowed in favour among global equity mangers. That has been one of the better sectors this year as some of the concerns in the US have receded.’ Somers told Citywire Selector.
‘We have managed to find ways of finding companies that benefit from that secular theme almost regardless of where the political noise has been and where the market has found favour and clearly that has been a big benefit for us this year.’
Healthcare is the biggest sector in the fund at 22.4% and compares to a benchmark allocation of 11.3%.
At a stock level, managed healthcare company UnitedHealth Group makes up 2.2% of the fund and is among diagnostic and service companies in the sector which are maintaining profitability.
'The first question we ask when it comes to healthcare is who is paying? We tend to focus on companies which help the system to limit its costs. The likes of UnitedHealthcare - which is the leading managed care organisation in the US - has become a hugely successful franchise by virtue of its ability to limit costs within the system.'
From November 2017, the fund is being renamed and restructured to better emphasise its SRI criteria.
One area Somers is increasing his allocation is IT, which currently makes up 10.4% of the fund. Allocations to ecommerce firm Alibaba and Alphabet, which are in the top ten holdings, will rise, he said.
‘There are a handful of tech companies, particularly say the semi-conductor side where the demographic theme has not been so relevant in those stocks,’ Somers said.
‘We have examples of semiconductor companies which are fantastic with sustainable business models and long term competitive advantages and will be very suitable under the new strategies that didn't have that demographic element under the previous strategy.’
The Schroder ISF Global Demographics Opps fund returned 30.1% in US dollar terms over the three years to the end of September 2017. This compares to a 29.3% rise by its Citywire-assigned benchmark, the MSCI AC World TR USD, over the same timeframe.