Fondita Healthcare winner in Lipper Europe!
The fund analysis company Refinitiv Lipper has named the winners of its annual ranking of investment funds. Fondita Healthcare won the best fund award in Europe, Germany and Austria in the category “Equity Sector Healthcare” and came in first place out of a total of 50 funds.
We interviewed the fund managers Tom Lehto and Janna Haahtela.
1. Congratulations! How does it feel to receive the award?
Thank you very much. Of course, it feels good to receive an award for the work we have done. The fund was launched in June 2018 and the award considers the best risk-adjusted return on a 3-year period. We are delighted the long and strong performance, and, above all, we are pleased to have been able to deliver an excellent investment for our clients.
2. Can you tell us more about why Fondita Healthcare has done so well since the fund’s launch, both in relation to the market and other healthcare funds?
It all stems from our investment process, which is based on selecting companies that have potential for good long-term earnings growth and therefore strong performance. We look for responsible, quality growth companies that benefit from trends and themes that give them a long-term tailwind of both top-line and earnings growth. The healthcare sector is defensive by nature but also has several interesting sub-sectors with strong growth profiles and we have managed to position ourselves well within these.
3. Please tell us about your process for finding companies for the fund and what you focus on in your selection process.
A: It is important to understand the long-term drivers but also to be aware of short-term trends affecting supply and demand in the healthcare industry. We like companies with a strong market position in their niche, with a proven strategy and a stable profitability profile. We consider ESG aspects at all stages of the investment process.
4. When do you dispose of companies? How do you view sustainability in the healthcare sector?
We are long-term investors, which means that we do not actively trade our holdings. The main reason for selling is that we lose confidence in the management, or the equity story changes. This may be because management is not delivering what they promised in terms of performance and growth, or if any risk, related to environmental, social responsibility or good corporate governance, is realised. Environmental issues are rarely a problem, but social responsibility can take a hit via patient complaints and product recalls or carry risks via changing drug reimbursement policies.
5. How does Healthcare differ from other healthcare funds?
Fondita Healthcare is a global fund, but geographically we have always had an overweight in Western and Northern Europe relative to global healthcare indices. The fund has a clear overweight in medical technology companies at the expense of large pharmaceutical companies. This reflects the fund’s growth focus. The fund has a clear underweight in biotechnology companies, which on the other hand underlines the non-opportunistic approach we take. Nevertheless, we have exposure to the strong growth phase that biopharma is experiencing. The Fund has holdings in several companies that manage contract manufacturing or supply equipment for drug production and research.
6. What long-term drivers for the fund stand out in particular at the moment?
We have defined five long-term drivers for the Fund and the healthcare sector as a whole; 1) the ageing population – more need for healthcare 2) higher welfare – greater demand for devices and procedures to improve living standards 3) technological developments – better diagnostics and preventative care and increased efficiency of care through digitalisation 4) environment and climate change – air pollution contributes to several diseases that should be addressed 5) low price elasticity – perhaps more a supporting factor than a driver but an important aspect that underscores the attractiveness of the sector. The pandemic has also crystallised the need to invest in domestic healthcare infrastructure and capacity.
7. How are the companies currently doing? What has been the impact of the turbulent stock market year so far? What is your general view of the stock market at the moment?
It has been a challenging year so far. First, we had a strong sector rotation away from growth companies to low valuation companies. Then Russia’s war with Ukraine broke out which added to the uncertainty. In recent weeks we have again seen healthcare stocks start to do relatively better thanks to more defensive and non-cyclical characteristics.
8. What do you think will lead developments for the rest of the stock market year? And how will this affect the healthcare sector?
The outcome and duration of the war is difficult to predict but it is a key factor. During this turbulent period, healthcare stocks are considered less risky. So far, we have seen a sharp decline in company valuations without any noticeable deterioration in company performance. However, we cannot rule out margin pressure via higher raw material costs and bottlenecks in supply chains. When the situation normalize, as we believe it will, there is again every chance of a strong recovery.
9. Why invest in Healthcare?
A: The fund’s slogan is “Health is everything” and it highlights quite well why the healthcare sector will always be attractive. No matter where we are in the economic cycle, we strive to maintain and improve our well-being and there is a lot of innovation and technological development that makes this possible. Fondita Healthcare’s investment strategy is to find those companies that are well positioned in this evolution.
Read more about Fondita Healthcare here.