The stock market seems to be waving about like a wounded animal, swerving from one factor driving performance to another value, growth, momentum etc. At the time of writing, the FTSE 100 is up around 7% all through the year-to-date. In dollar terms, it is up a little over 8% but, simulating the pound, it dropped in August into negative territory prior to rebounding again. Investors are diversely told that the market is expensive or cheap, and that recession is both unlikely and imminent. In the middle of so much apparent confusion, where can one find a stable outlook? Surely there must be somewhere that can offer growth, yield, and a reasonable valuation?
A few things in life are certain, but some axioms hold fast: there are ever more people in our world, and they are getting older on average. The volume of healthcare resources are used by the elderly since the price we pay for a longer lifespan is an increased burden of chronic disease later in life. In evolving markets, health spending rises faster than GDP as the emerging middle-classes have the time and resources to focus on remaining healthy. The combination of all these factors is unrelenting demand growth. Put clearly, healthcare is the secular growth story of our age and one that is likely to accelerate as medical discoveries and new technologies open up ever more opportunities to ease the burden of human suffering.
The healthcare systems of the evolved world were not designed to cope with this elderly, morbid population, and healthcare expenditure has been growing as a proportion of GDP, eating into our marginal wealth gains from productivity. This trend will worsen if the system is not changed.
The cliche that the NHS simply needs more finances is mere political expediency; more cash will not magic up trained doctors and nurses, nor will it tame the beast of above-inflation medical cost trend. However, one need not surrender to this fate – myriad new technologies have credibly showed that the healthcare treatment paradigm is ripe for evolution, offering both improved care and lower costs. It is not just society that will benefit but also the investor can profit from this profound revolution as well.
BB Healthcare Trust was launched in late 2016 to profit from this necessary and inevitable healthcare revolution.A concentrated portfolio of operationally customized exposures to key areas of profound evolution are managed. These changes will likely happen first in the United States but will be global. However, the spoils of victory will be accruing to a very different set of companies than those whose incremental innovations in drugs and medical devices have powered portfolios in recent decades, so our fund is unconstrained and can thus invest in relevant adjacent areas such as technology and consumer products. We are total return focused, but offer a divided out of capital as many of these companies will not pay dividends for decades, if at all. This also allows us to offer a competitive payout in a world where yields are hard to find (especially ethical or sustainable income – how much FTSE yield comes from extractives and tobacco?).