The Biotech Growth Trust: Reasons To Be Optimistic
Edison | Jul 31, 2018 01:15AM ET
The Biotech Growth Trust Plc (LON:BIOGW) is managed by Geoff Hsu and Richard Klemm of OrbiMed Capital. They aim to generate long-term capital growth from a diversified portfolio of global biotech equities. The managers are very optimistic on the industry outlook, citing a more benign political environment, a high level of innovation, a favorable regulatory regime, and reasonable valuations. In addition, following US tax reform, they expect an acceleration in merger and acquisition activity, which has historically been an important driver of share prices within the biotech sector. The managers acknowledge that BIOG’s performance in the last three financial years has been disappointing and they are looking to build on the trust’s long-term record of outperformance versus the benchmark NASDAQ Biotechnology index.
Investment strategy: Bottom-up stock selection
The managers and the team at OrbiMed undertake diligent fundamental research, which includes financial modelling, an assessment of research pipelines and identification of potential catalysts. Company and industry meetings are a key element of the research process. BIOG invests across the market cap spectrum from large-cap multinational companies with multi-billion dollar revenues through to promising early-stage companies. The majority of the trust’s c 50 holdings are US companies, reflecting the country’s dominance in the global biotech industry. Gearing of up to 20% of NAV is permitted (net gearing of 8.7% at end June-2018).
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