Star fund manager Neil Woodford has warned UK investors are too cynical on healthcare.
Woodford lists life expectancy, demographics and growth in healthcare expenditure as structural long-term growth drivers for the sector, but he says investors do not recognise the sector is facing an inflection point.
“In the US there’s more belief, but here in the UK the investor base is pretty cynical about healthcare,” Woodford says, adding the market is conditioned by history and does not value pipelines.
Because there is no way to unwind the “demographic time bomb” healthcare inflation must be addressed through the developments of better therapeutics, Woodford argues.
The Woodford Equity Income fund has 36.5 per cent of the portfolio in healthcare, while the Patient Capital fund’s allocation is nearly double that at 65.7 per cent.
A breakdown of his funds’ allocations to the sector shows the Patient Capital trust has 14.4 per cent in healthcare technology, 14.3 in rare diseases and 6.9 per cent in oncology. In contrast, the Equity Income fund these represent 2.8 per cent, 2.9 per cent and 0.9 per cent respectively, while large cap diversified companies make up the bulk of the healthcare allocation.
In the Equity Income fund AstraZeneca, GlaxoSmithKline and AbbVie are the fund’s largest healthcare holdings representing 8.1 per cent, 7.8 per cent and 3.3 per cent.
The largest holdings in the Patient Capital fund are Prothena (14.3 per cent), Oxford Nanopore (7.7 per cent) and Theravance Biopharma (4.6 per cent).
Woodford suffered several setbacks from healthcare holdings in his portfolio in 2016.
In September, several major healthcare holdings were hit when presidential hopeful Hillary Clinton criticised unfair pricing in pharma.
In July, his holding in Circassia suffered a major share fall when a late stage trial of a cat allergy drug found the treatment was not more effective than the placebo.