"Healthcare is an evergreen sector"

Dr. Lilian Montero, CIIA, Crossinvest based in Zurich

We've recently observed increased volatility in the healthcare sector. How do you assess the future prospects?

These fluctuations are primarily due to recent events in the US, by far the world's largest healthcare market, which in turn is one of the largest taxpayers. There is currently a lack of clarity on governmental policies and financing related to vaccines, areas such as Medicaid (a state funded health insurance), biomedical research, together with the potential implementation of new drug safety standards for marketing approval. Despite these fluctuations, the long-term outlook remains intact: the product pipeline is full, new technologies are emerging, and investment in research and development remains high. Life expectancy continues to rise thanks to healthier nutrition and advanced healthcare, sustainably securing the demand side.

What is the beauty of the healthcare sector?

We're looking at a vast invesments segment — one that extends far beyond major pharmaceutical firms: The industry includes companies that provide medical services, develop or manufacture medical devices or pharmaceuticals, offer health insurance, or otherwise facilitate patient care. The sector is also very broad, encompassing many subsectors, including medical treatments, medical technology (orthopedic devices, laboratory tools and hospital instrumentation), clinics, hospitals, and the entire service industry. These not necessarily related subsectors follow their own dynamics, allowing for natural diversification within the theme. What's unique about this area of investment is that these diverse subsectors, each with their own drivers, respond differently to consumer and economic conditions. This continually presents investment opportunities, such as the currently booming pharmaceutical distribution and diagnostics sectors. With its versatility, healthcare is an evergreen sector—and well-equipped to withstand economic cycles. In periods of growth or recovery, cyclical sectors and subsectors, supported by strong economic drivers, enable above-average growth, for example, in dental implants, and in the financing of small-cap biotech companies. Innovations enable world-class growth despite price pressure, increasing regulatory hurdles, and patent expiration. In recessionary phases, however, countercyclical sectors and subsectors make the healthcare sector resilient, as their products and services — especially healthcare services and pharmaceuticals are essential. High-quality large-cap companies offer protection during downturns and generate strong cash flows and high dividends.

Where do you see the biggest risks in the sector? 

For innovation, financing pressure in basic research institutions such as the NIH (National Institute of Health) and lack of mid-term visibility on the US administration policies can hurt emergence and financing of biotech startups.

The weight-loss injections are a hit. What other areas do you see as growth drivers?

There is still significant growth potential in these obesity therapies thanks to treatments with better tolerability, small molecules in the pipeline that would lead to optimized production costs and scalability, and new forms of administration, such as oral ones. The market expects a comprehensive toolkit to treat each individual patient. Great expectations are placed on so-called brain shuttles, such as Roche's for the treatment of Alzheimer's. Considerable advances are being made in the treatment of immunological conditions. Non-invasive diagnostics are becoming increasingly important for cancer detection and treatment and radio-ligands are emerging as a powerful strategy to treat solid tumors. People's desire to “age young” opens up new areas of application and therapy. We also see interesting potential in off-patent medications such as generics or biosimilars.

What sets the Crossinvest Healthcare Fund apart from others?

Our Global Long Bias Equity Healthcare Sector Fund is an actively managed, UCITS fund. Its objective is to provide investors with long-term capital appreciation. The fund's greatest strength lies in its agility—the ability to adjust exposure as needed and in response to identified opportunities or risks, rather than dogmatically adhering to allocations. We are as pragmatic as possible. The fund pursues a long-term perspective, capitalizing on the structural challenges in the healthcare sector. The investment approach is both top-down and bottom-up, based on sound fundamental data. The fund is actively managed to better navigate macro and industry cycles, maximize performance and minimize volatility. Risk management systems monitor risks by subsector, region, market, and theme. We have direct access to management and decision-makers at the companies in which the fund invests—sometimes for years.

Who is in charge of the fund management?

Our Portfolio Management team offers extensive experience in investment and portfolio management, as well as expertise in healthcare and life sciences. Like me, my partner, Luisa Vernizzi, brings this critical combination to the table. She holds a doctorate in Molecular Biology from the University of Zurich. We also have access to proven services within the Crossinvest Group, for example, in the area of risk management.

About Lilian Montero

Lilian Montero holds a PhD in Molecular Biology and Biochemestry from the University of Basel and is a Certified International Investment Analyst with 25 years of experience in R&D, analysis and portfolio management at Novartis, Gema Biotech-Roemmers, Julius Bär, NZB and UBS. Awarded with the Swiss Derivative Award as best product of the year in 2015.