Page 28 - DIY Investor Magazine | Issue 40

April 2024 28
DIY Investor Magazine ·
Looking ahead, the biotech sector is likely to benefit from structural trends that should drive significant growth for years to come, although investors should be prepared for some cyclical volatility along the way.
However, this is a sector where inexperienced investors
may struggle to identify the likely winners and the specialist knowledge of experienced managers, such as IBT, can make a significant difference to long-term outperformance.
View the latest research note here >
However, one of the key benefits of active management is the ability to tailor the portfolio according to the particular stage
of the cycle. Ailsa and Marek seek to manage this cyclical volatility by tilting the portfolio towards more stable, established companies when valuations overheat and into higher-beta younger companies when valuations look more attractive.
As a result, they have re-invested recent proceeds from M&A into smaller, development-stage companies to capture this potential upside opportunity.
In addition, IBT seeks to manage downside risk and preserve capital by investing in a basket of companies targeting the same therapeutic area and avoiding undifferentiated ‘me too’ drugs. The managers also reduce the trust’s exposure ahead of binary events such as the results of clinical trials.
This approach has paid off, with IBT achieving a net asset value total return of 43% over the last five years (as at 04/03/2024), which is an impressive achievement given the challenging conditions. This also shows the merit of active management by sector experts, with IBT comfortably beating the equivalent 34% return for the fund’s benchmark, the Nasdaq Biotechnology Index.
IBT also pays a dividend set at 4% of the closing NAV for each financial year, which, at the current share price, is equivalent to a yield of 4.2% for income-seeking investors, one of the highest in the AIC Biotechnology and Healthcare sector (as at 04/03/2024).
Disclaimer
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by International Biotechnology. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
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