Despite a global pandemic that has mainly affected the older and more fragile parts of the population, Rothschild Asset Management continues to believe in its R-co Thematic Silver Plus strategy, which has just celebrated its 10th anniversary.
Ageing is one of the main challenges facing developed economies, particularly in terms of financing pensions. Within 25 years, the world population over 65 years of age will have doubled, and they will account for the bulk of the increase in global consumption. It is also the segment of the population with the greatest financial means, and this theme therefore represents a clear opportunity for investors.
New trends
Despite the health and economic crisis of recent months, so-called ‘grey’ strategies have generally performed well above the market average. While some segments were affected - notably the leisure sector with cruise operators – the solid performance of healthcare stocks has kept these funds afloat. ‘Healthcare stocks represent the largest single block of our strategy,’ says portfolio manager Nathalie Bourdoncle.
And this has helped her fund to post a performance of 3.8% year-to-date. ‘The coronavirus crisis caused a real craze in certain market segments, such as diagnostic companies, communication services, home automation or digitalisation of healthcare [such as remote consultation, online sales of medicines, etc.], with performances that were often exceptional,’ she notes. ‘It has also raised awareness of the chronic under-investment in hospitals and nursing homes, a situation that will lead to increased spending on healthcare over the next few years.’
Elections
In the coming months, the healthcare segment is likely to be affected by the US presidential election and possible healthcare reform, however. This could make this important market less lucrative.
Nathalie Bourdoncle says she is not ‘particularly alarmed’ by the prospect of healthcare reform, referring to the negligible effects of previous such reforms in the United States. ‘The implementation of the Obamacare programme has had little impact on the profitability of large groups, for example, and innovation is still being rewarded in this country, no matter the political backdrop.’
Another trend concerns the rise of Asian countries, especially China, which today also faces an explosion of their elderly population. ‘The Chinese authorities have become aware of the negative effects of the one-child policy. They have drastically shortened the registration deadlines for new drugs and have set up a reimbursement system for a whole range of cutting-edge treatments,’ says Bourdoncle.
Best-in-class
The theme of ageing has become quite popular among investors, resulting in the launch of many products in recent years. R-co Thematic Silver Plus is one of the older funds, sporting a 10-year track record with an annualised performance of about 10% since its launch and a five-star rating from Morningstar.
The buy-and-hold philosophy of the two managers encourages them to hold stocks for the long term, with names that have been present in the portfolio since the launch of the strategy. Compared to its main competitors, this product is characterised by an investment policy that favours European small- and midcaps, with little-known stocks such as Grifols, Amplifon, or Biomerieux, but also names such as ArgenX or UCB.