Questor: healthcare trust shakes up leadership as our vaccine heroine makes her return

Investing in healthcare stocks would seem an obvious winning strategy during a global pandemic and so it has proved for three investment trusts tipped by Questor that specialise in this area.

International Biotechnology, Biotech Growth and Worldwide Healthcare have all delivered solid returns since this column recommended that readers buy their shares.

What’s perhaps surprising, however, is the relatively minor role of companies that provide coronavirus treatments in delivering those gains – doubly so given the involvement of Kate Bingham, former chairman of the Government’s Vaccine Taskforce, in one of the trusts.

None of the three owns shares in the companies behind the trio of leading coronavirus vaccines: AstraZeneca, Pfizer, BioNTech and Moderna.

Biotech Growth has even actively avoided companies involved in Covid-19 treatments, believing their shares to be overvalued and the likely profits from their drugs slim given political pressure to deliver them at low cost.

This column has had to look elsewhere for its virus winners, tipping BioNTech before its vaccine breakthrough for a 69pc gain, while Avacta, supplier of “lateral flow” tests, has risen by 123pc since our buy recommendation. Moderna has now been sold for a 94pc gain.

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Questor is not complaining about the progress of the three healthcare trusts we have tipped, however. Shares in each have beaten the returns from the broader market for healthcare and biotechnology stocks over one, three, five and 10 years.

But neither is this column resting on its laurels, particularly in the case of International Biotechnology given that Carl Harald Janson, manager of the trust for more than seven years, has stepped down. Lead management of the trust has been handed to Ailsa Craig, who has worked alongside Mr Janson since 2013, and Marek Poszepczynski, who joined a year later.

Questor is reassured by Mr Janson’s successors’ long record of working alongside the manager. More stability is provided by Ms Bingham, who has been involved with the trust since the turn of the century and returned to run its small portfolio of unquoted investments in January after her time in charge of the Vaccine Taskforce.

Ms Craig and Mr Poszepczynski, in charge of the quoted stocks that make up the bulk of the portfolio, inherit a fund in good shape. But the returns during Mr Janson’s tenure have been due in part to the narrowing of substantial discount to net asset value.

Now trading at a small premium to NAV, the shares had languished as much as 20pc below the value of the trust’s assets in 2013.

Strip away that tailwind to focus purely on the return generated by the trust’s assets and the figures aren’t quite as stellar. As analysts at Stifel, the broker, have noted, a five-year NAV return of 76pc is no better than that of its benchmark, the Nasdaq Biotechnology Index, and trails rivals.

Stifel analysts have focused on the unquoted part of the portfolio, managed by Ms Bingham and others. At 11pc of the trust’s assets, they argue that it is too small to provide meaningful returns and question the level of transparency provided, which the trust is looking to address.

“The healthcare start-ups into which the unlisted allocation is invested tend to be a slow-moving area, taking many years to deliver results,” the analysts added.

It is on this point that the trust suffers in comparison with Biotech Growth, which also invests in unquoted companies, albeit at a much later stage. International Biotechnology’s chief rival tends to back private companies in their last funding round before listing, as well as investing in them when they float.

It’s a strategy that has reaped returns: two of the five biggest contributors to Biotech Growth’s gains in its last half-year results were the products of this process.

This isn’t to say that International Biotechnology should ape the approach of its rival. A distinct approach from its racier peer, featuring bigger holdings in larger and more established biotech companies, gives investors a stake in a different part of the market.

But if its returns lag its rivals’ for too long the hard-won premium may not be around forever. We'll hold for now.

Questor says: hold

Ticker: IBT

Share price at close: 740p

Read the latest Questor column on telegraph.co.uk every Sunday, Tuesday, Wednesday, Thursday and Friday from 5am.