Fund in Focus - Axa Framlington Biotech
An interview with: Linden Thomson, Fund Manager
Who is the fund manager and what is your role?
Hi Nigel, my name is Linden Thomson and I manage the biotechnology fund here at AXA Investment Managers. I’ve been running the fund now for seven years and have been investing in, covering the biotech sector for the last 16 years across both the buy side and the sell side.
I am a CFA charter holder and my academic background is in medical micro biology from Edinburgh University. My role here is to run a portfolio of those equities which are best placed in the biotech sector.
Why should investors consider Biotech in their portfolio?
We believe that there are great investment opportunities to be found in biotech. As we’ll talk about I’m sure later in our discussion, there are solid underlying fundamentals which should lead to above market growth rates. I think biotech also offers access to a part of the equity market that’s not captured by generalist equity funds.
What is your Outlook for the Biotech Sector?
We remain very confident and optimistic on the biotech sector on a long term basis. We would highlight four key takeaways for your listeners in terms of why we remain confident here.
Firstly demographics, secondly innovation, thirdly regulation and finally valuation.
On Demographics they are very supportive of the healthcare sector generally, one example we would highlight is the fact that we are all living longer. We know as the older you get the more healthcare you use.
Turning to innovation, this is the life blood of the biotechnology sector on a long term basis. It is the key driver of these companies, these small cap companies, the M&A, and there's a couple of really good examples of where new disruptive therapies have been approved over the last year in both gene therapy and cell therapy. We think that this innovation is very strong and set to continue.
Thirdly regulation – the operating environment for these companies is very good at the moment. The FDA is supportive of all stakeholders and that includes the biopharma businesses. In fact new drug approvals from the FDA are at all time highs.
And then finally looking a valuation, the small and mid cap sector, part of the sector remains certainly interesting on a valuation point of view, versus history, and if you look at some of those large cap companies actually they’re trading at levels we haven’t seen for a number of years they certainly look interesting on a valuation basis.
What makes the Axa Framlington Biotech Fund different?
I think there are a few very strong points of differentiation here. Firstly, our understanding of the sector. I and the team have been working in the sector for a long time, and we all have scientific backgrounds, I certainly think that helps.
We perform careful due diligence and of course it’s very much a stock picking sector and a stock picking portfolio. We don’t think these can be replicated in passive funds.
Secondly, we invest across all areas of the market cap spectrum, across the sector. This means we can have a diversified portfolio even at the lower end in those smaller cap stocks where they tend to be higher risk, higher reward.
And finally we have a long term investment horizon this allows us to take advantage of those mispricing opportunities we spoke about earlier.
It is important that no actions should be taken without first taking advice. Personal circumstances and an individual’s appetite for risk means that the advice for one person may not be the same for everyone. Please remember that the value of your investment can go down as well as up, and may be worth less than you paid in. Information is based on our understanding at 02.05.19