Big Picture – A Deep Dive Examination of BB Healthcare Trust PLC
BB Healthcare Trust PLC Snapshot
BB Healthcare Trust plc is a high conviction, long-only investment trust invested in listed or quoted global healthcare equities. It is unconstrained and able to invest regardless of market cap, sub sector or region, and the portfolio is concentrated with a maximum of 35 holdings. The target total dividend in the first financial period is 3.5 pence per ordinary share (to be paid mostly out of capital) and in subsequent financial years will be set at 3.5 per cent. of net asset value at the end of the preceding financial year (to be paid mostly out of capital). BB Healthcare has an annual redemption option in order to assist with discount control and directors’ fees (for UK-based directors) are paid in shares. BB Healthcare is managed by Bellevue Asset Management AG which has built a successful track record in this sector.
INVESTMENT OBJECTIVE AND RETURN OBJECTIVES
The investment objective of BB Healthcare is to provide Shareholders with capital growth and income over the long term, through investment in listed or quoted global healthcare companies. BB Healthcare’s specific return objectives are:
- to beat the total return of the MSCI World Healthcare Index (in sterling) on a rolling 3 year period (the index total return including dividends reinvested on a net basis); and
- to seek to generate a double-digit total shareholder return per annum over a rolling 3 year period.
The portfolio comprises a single pool of investments, selected for their 3 to 5 year total return potential. Organic dividend yield is not a consideration in portfolio decisions and the focus is on maximisation of total shareholder return. Stocks are only considered for inclusion in the portfolio following a comprehensive multi-stage due diligence process. The investment process is based on bottom-up fundamental analysis. Whilst the hypothetical investable universe is very broad, the requirements around levels of daily liquidity and financial disclosure mean that the realistic investable universe is typically approximately 800 stocks at any given time. Companies in the portfolio are selected on the basis of their merits rather than their weighting in any particular benchmark or index.
The investment process can be summarised as consisting of four broad stages:
MACRO CONSIDERATIONS (THEMATIC ASSESSMENT)
These include analysis of sub-sectors within the healthcare industry, including their relative valuations, growth prospects and regulatory outlook. Also, the risks and opportunities associated with the political environment and sector M&A activity. The Portfolio Manager is happy to discount ownership of certain healthcare sub-sectors for multi-year periods based on this analysis.
BOTTOM-UP ANALYSIS (IDEA GENERATION)
This includes the use of proprietary screening tools to narrow the investable universe to the most promising candidates. Management quality and accessibility are key criteria.
SELECTION OF HIGH CONVICTION CORE PORTFOLIO (STOCK WEIGHTING CONSIDERATIONS)
This is driven by the Portfolio Manager’s fundamental analysis of the narrowed investable universe, including the relative attractiveness of sub-sectors, expected returns, downside risk and trading liquidity in potential investee company securities.
RISK MANAGEMENT FRAMEWORK (INDEPENDENT OVERSIGHT)
This is provided by a combination of the Portfolio Manager’s own risk management tools and the oversight provided by a highly experienced, independent Board of non-executive directors. An integral part of this framework is a rigorous selling discipline in relation to portfolio holdings, with position prices and valuations continuously monitored against the Portfolio Manager’s views on valuations and expected returns.
Investment Strategy Portfolio
TOP 10 HOLDINGS AS AT JUNE 30 , 2017
SUB SECTOR BREAKDOWN AS AT JUNE 30, 2017
MARKET CAP BREAKDOWN AS AT JUNE 30, 2017
GEOGRAPHICAL BREAKDOWN (OPERATIONAL HQ) AS AT JUNE 30, 2017
BOARD OF DIRECTORS
PROF. JUSTIN STEBBING, CHAIRMAN
Justin is a clinical oncologist and has published over 500 peer-reviewed papers on cancer. He is a Fellow of the Royal College of Physicians, the American Board of Internal Medicine and the Royal College of Pathologists and sits on a number of advisory boards. He also has previous investment management experience as a healthcare analyst.
JOSEPHINE DIXON, CHAIR OF THE AUDIT COMMITTEE
Josephine is a chartered accountant who sits on the boards of Standard Life Equity Income Trust plc, JP Morgan European Investment Trust plc, Strategic Equity Capital plc and F&C Global Smaller Companies Trust plc. Her executive experience includes finance, governance and general commercial roles in a number of sectors.
RANDEEP GREWAL, CHAIR OF MANAGEMENT ENGAGEMENT COMMITTEE
Randeep is a London-based fund manager at Trium, with over 17 years of Healthcare investment experience, including F&C Asset Management, ICAP Equities and Tudor. Randeep trained as a Vascular and General Surgeon and read both Medicine and Computer Science at Cambridge University. He sits on the board of Tissue Regenix.
Paul is a London-based managing partner at Eisenstat Capital Partners (ECAP), with 20 years’ investment experience. Before joining ECAP, he managed European equity portfolios at Fortress Investment Group. Prior to that, he was a portfolio manager at Deephaven Capital Management. He began his investment career as an analyst and assistant portfolio manager with UBS Asset Management.
Siddhartha is a cancer physician and professor at Columbia University. In addition to his extensive academic publications, he has written several books, including The Emperor of All Maladies (winner of a Pulitzer Prize in 2011). He is a Rhodes scholar and graduated from Stanford University, University of Oxford, and Harvard.
Dr. Daniel Koller
Daniel has over 16 years of experience in the healthcare sector. He joined Bellevue Asset Management AG in 2004 and was appointed head of portfolio management for the investment company BB Biotech in 2010. Previously, he was an asset manager for equity4life Asset Management Ltd and prior to that an equity analyst at UBS Warburg, covering the biotechnology sector. Daniel has a PhD in Biotechnology from the Swiss Federal Institute of Technology (ETH) Zurich.
Paul has 18 years of experience in the healthcare sector on the sell-side and was top-rated by a number of institutional investment clients. He was one of the first research partners at Redburn, Europe’s leading independent research firm. His work there included bespoke projects on healthcare portfolio construction for several institutions. Paul was previously an analyst and corporate financier at UBS Warburg and studied biochemistry.
BELLEVUE ADVISORS LIMITED
32 London Bridge Street
SE1 9SG London
Phone: +44 (0)203 326 29 83
PEEL HUNT LLP (SPONSOR, BROKER, PLACING AGENT & INTERMEDIARIES OFFER ADVISER)
Luke Simpson (Corporate Broking)
Mark Thompson, Eddie Nissen (Sales)
Kathy Boate (Intermediaries)
120 London Wall
EC2Y 5ET London
Phone: +44 (0)207 418 89 00
MAITLAND (MEDIA ENQUIRIES)
William Clutterbuck/ Georgia Lewis
125 Shaftesbury Avenue
WC2H 8AD London
Phone: +44 (0)201 737 951 51
E-Mail: glewis(at)maitland.co.uk or wclutterbuck(at)maitland.co.uk