Contrasting fund products offer a stake in the assured market growth for big players in the pharmaceuticals and health-care industries or a more spectacular ride through the rewards and dangers of biotechnology and small and mid-cap stocks
No sooner is Sars behind us than the spectre of dengue fever looms large. Health, it seems, is on everyone's mind and this is reflected in the funds sector.
HSBC launched its capital guaranteed health-care fund at the end of July and British fund house Framlington Investment Management was in town recently to promote its health fund, among other products. The HSBC product is another twist on the guaranteed fund theme with 100 per cent capital guarantee and 5.75 per cent dividends over four years and nine months.
The fund will invest in the world's 12 largest pharmaceutical and health-care stocks. The top 10 pharmaceutical companies account for 49 per cent of market share, so this fund gives investors easy access to a slice of the winnings from a sector where global sales are forecast to grow at 6 per cent per annum over five years.
For Framlington, however, the companies that account for the other 51 per cent of sales hold the most interest, and fund manager Caspar Rock says the fund's bias away from big pharmaceutical companies will be to its advantage in the coming year. 'We are heavily weighted towards biotechnology and small and mid-cap stocks,' he said.
Mr Rock's bleak outlook for large pharmaceutical companies stems from estimates that by 2005, 50 per cent of prescriptions will be for generic drugs. Declining research and development also means large pharmaceutical companies are not bringing as many new drugs to market.
'There have already been a few flurries of concern about patent expiries and the pricing issues in the United States,' Mr Rock said.