Impact Healthcare REIT PLC (LSE:IHR), the London-listed fund that switched managers in March, has cautioned that the strong run in healthcare stocks is unlikely to continue into the second half of 2026.
But, it said it was primed to navigate the changing environment: "As an absolute return strategy that can hold both long and short positions, we feel the company is well placed to navigate this market environment."
Kosta Kleyman, the fund manager appointed after Columbia Threadneedle Investments took over the mandate, said he remained moderately positive on the sector but expected stock selection to matter far more than the market's overall direction.
He noted that recent gains had come without the usual tailwinds of rising equity markets, stronger earnings growth or US interest rate cuts, driven instead by company-specific and sub-sector factors.
Interest rates remain restrictive and inflation has proved stickier than hoped, a backdrop that would normally weigh on healthcare.
Instead, the sector has largely shrugged off its rate sensitivity as a patent cliff of more than $300 billion, the sharp drop in sales that follows the expiry of drug patents, forces large pharmaceutical groups to replace lost revenue.
Mergers and acquisitions have been the main driver, with first-half deal activity already ahead of the whole of last year and concentrated on bolt-on purchases across obesity, oncology and immunology at hefty premiums.
Kleyman's chief concern is that healthcare, and biotechnology in particular, are leveraged industries, meaning persistently high inflation and interest rates could strain company balance sheets and put valuations back under pressure.
The trust, which can hold both long and short positions, argued its absolute return approach left it well placed to navigate that environment.
That strategy targets net market exposure of between zero and 50%, aiming for positive returns with lower volatility than healthcare equity markets.
The portfolio remains tilted towards de-risked biotech companies rich in potential catalysts and likely takeover targets, while adding selectively to life-science equipment providers and contract research firms showing early signs of recovery.
Turning to performance, net asset value fell 1.1% on a total return basis over the six months to 31 May, while the share price total return was down 2.0%.
Both measures beat the MSCI World Healthcare Index, which fell 5.1% over the same period, though the index is provided for reference only rather than as a formal benchmark.
Since Columbia Threadneedle's appointment on 5 March, the trust has delivered positive total returns of 1.7% on net assets and 5.3% on its share price, against a 4.9% decline in the index.
The company declared an interim dividend of 2.565p per share, payable on 18 September, giving a yield of 3.8% based on the closing price of 139.6p on 13 August.
Shares traded at an average discount to net asset value of 6.6% over the half, narrowing to 5.1% by the period end.
The results were the first under Sarah MacAulay, who took over as chairman following April's annual meeting.