London, UK, 18 July 2017
Edison issues review on HBM Healthcare Investments (HBMN)
HBM Healthcare Investments (HBMN) is a Swiss-listed, globally diversified healthcare fund that blends listed equities with private companies held both directly and via funds. It invests for long-term capital growth, and many of the listed stocks in its portfolio are those it has backed from an early stage as private companies. The private exposure serves a dual purpose of accessing potentially high-growth investments and limiting NAV volatility, while some of the more mature companies in the listed portfolio may become takeover targets. The fund is well spread by clinical focus and has a bias towards companies with products already on or close to the market. Following a number of successful IPOs and trade sales, HBMN is looking to increase its private company exposure, and holds a short position in a biotech index ETF as a protection against a market downturn. A high distribution policy provides a yield of c 5%.
At 15 July 2017, HBMN traded at an 18.3% discount to NAV. While this is wider than its peers that invest wholly or mainly in listed equities, it is narrower than both the short- and longer-term averages of c 26-27%. Management reports strong demand from investors attracted by the c 5% yield as an important factor in recent discount narrowing; however, the rating arguably reflects the private company exposure - by way of context, the AIC Private Equity sector is on a 14.5% average discount compared with 3.5% for the AIC investment company universe.
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