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How does the AB International Health Care Portfolio Fund invest?
Healthcare funds

How does the AB International Health Care Portfolio Fund invest?

The AB International Health Care Portfolio fund offers an opportunity to invest in a key and defensive sector with an experienced investment team, in a broad strategy and a proven track record.
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3 MAY, 2024

By Andrea Sepúlveda from LatamSelf

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The AB International Health Care Portfolio fund is a thematic global equity fund based in Luxembourg, launched in middle 1983. The management company has therefore recognized the potential of the healthcare sector for decades, in addition to integrating sustainability considerations into the investment process as it is classified as Article 8 of the SFDR.

Furthermore, its excellent results, as will be illustrated below, have earned it recognition and ratings from major global financial information platforms.

Features of the AB International Health Care Portfolio fund

This strategy primarily invests in healthcare sector companies or those related to it. The fund's philosophy focuses on innovation and cost reduction in the healthcare sector, identifying opportunities for leading companies to increase their market share and generate solid performance.

AllianceBernstein, the management company, is known for its culture of diverse perspectives and innovation, which has led to success with global clients that include both individuals and the world's largest institutions.

The company manages approximately 725 billion USD in assets under management (AUM), has over 4,700 employees and is present in 27 different countries/jurisdictions.

  • Investment strategy: The investment team implements its strategy through a disciplined investment process, focused on profitability and reinvestment, using both fundamental and quantitative analysis to select the companies that will perform best in the long term (bottom-up approach). To outperform its benchmark, the team adopts an active and high conviction selection. It aims to have in its portfolio between 40 and 60 companies that offer the best opportunities, as indicated by AB, this strategy invests in business and not in science.
  • Benchmark index: the MSCI World Health Care Index is the benchmark used by this fund
  • Investment Team: The fund's investment team is composed of Vinay Thapar, CFA, with over 12 years of experience in AB and 24 years of overall experience, and John H. Fogarty, CFA, with over 29 years of experience in AB and 31 years of overall experience. Both are supported by a specialized team of analysts who contribute with their experience and global vision that allows them to be part of a company like AB.
  • Assets: As of the end of March 2024, the strategy had nearly 4 billion USD in assets under management.

Evolution of the AB International Health Care Portfolio fund

Performance

Fund performance vs benchmark on different time horizons and different calendar years
Source: Factsheet AB International Health Care Portfolio I USD, 31/03/2024. Note: Past performance is not indicative of future performance. The fund's returns may increase or decrease due to exchange rate fluctuations.

One of the advantages in examining a fund with such a long history is that it is possible to compare it with its benchmark over longer periods, to analyze the consistency in the strategy and the long-term results.

Upon examining the table above, it is noted that the fund has been able to outperform the benchmark (MSCI World Health Care Index) over 3, 5 and 10 years, thus demonstrating that the fund's team has made a good selection of its global companies. This is due to the fact that the investment team is not limited by its benchmark index, being able to include companies outside the benchmark - something they have done quite well.

risk measures of the fund vs the category on a 5 years track
Source: https://markets.ft.com/data/funds/tearsheet/risk?s=LU0097089360:USD regarding the AB International Health Care Portfolio I USD fund as of 31/03/2024

The strategy factsheet does not contain specific risk data, but we can find them in an external source updated to a recent date and on different time horizons. Once again, taking advantage of the fund's launch date, it is possible to examine long-term risk metrics.

Here we can reinforce what has already been highlighted in performance results. Excellent 5-year alpha results, which shows that the team was able to achieve better results with a level of market risk (beta = 1). Therefore, the investment team has done an excellent job in selecting companies, demonstrating their expertise in analyzing the healthcare sector and applying sustainability criteria to maintain its classification as article 8 in the SFDR, which is not negligible.

Conclusions

Advantages

  • Institutional size and solid track record.
  • Confirmed alpha in the sustainable strategy.
  • Exposure to global equity with a defensive thematic approach.
  • Broad strategy and support from a company like AB.

Disadvantages

  • The specific niche theme may be too restrictive for a more generalist investor.

Therefore, the AB International Health Care Portfolio fund offers an opportunity to invest in a key and defensive sector with an experienced investment team, in a broad strategy and a proven track record.

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