Investment opportunities in the fight against cancer

February 4 marks World Cancer Day, an annual event led by the Union for International Cancer Control, to raise awareness about the disease and mobilise global action. With diagnoses on the rise and currently impacting more than three million people in the UK*, the need for innovation and treatment solutions has never been greater. Here we look at the healthcare companies and investment funds involved in the fight against its spread.

Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and tax rules can change. Chelsea does not offer advice and so if you are unsure of anything please contact an expert adviser.

Investing in oncology

This growing challenge is reflected in the global oncology market, which was valued at over $234 billion in 2023 and is expected to double by 2032**. US healthcare giant Johnson & Johnson has a clear vision when it comes to oncology: the elimination of cancer. “Our aim is to not only take down disease, but to change and save lives. Our aim is to be in front of cancer,” it has declared. Johnson & Johnson is one of the largest pharmaceutical companies in the world and an underlying holding in the IFSL Evenlode Global Equity fund***, which focuses on quality companies with the ability to achieve sustainable growth over time.

Elsewhere, Bristol Myers Squibb works on treatments across a broad range of cancers with the intention of changing survival expectations. This has included using immunotherapies in earlier stages of cancer, particularly for those patients whose tumours could be removed by surgery. This company is currently one of the largest holdings in the M&G Global Dividend fund***, which invests in companies that can provide stable and rising dividends. Its experienced manager, Stuart Rhodes, has been with the company for more than two decades and favours running a concentrated portfolio of 40-50 positions. While it doesn’t typically provide the highest yield, this fund offers a rising income stream and excellent total returns for investors.

Healthcare opportunities

More broadly, the healthcare sector has delivered outperformance: “Over the 35 years to October 2024, the S&P 500 Healthcare Index has delivered c12% annualised returns, similar to the technology sector,” according to Gareth Powell, manager of the Polar Capital Healthcare Opportunities fund. However, he also acknowledged that performance had been cyclical with distinct periods of under- and outperformance, due to broad market dynamics and specific industry drivers.

Looking ahead, he pointed out that global healthcare expenditure is forecast to have increased from $9.2trn to $24trn between 2014 and 2040****. “The upside is particularly strong in emerging markets, with China and India set to deliver 7.7% and 5.5% annualised per capita spending growth respectively over this period,” he added.

Elsewhere, the JPM US Equity Income fund invests in Abbvie***, a US biopharmaceutical company that develops a wide variety of treatments for serious health issues. We see this portfolio as a core equity income holding whose managers adopt a risk management approach with a diverse spread of holdings. Their aim is to find undervalued companies that offer a combination of durable franchises and strong management teams at the helm.

Of course, there is no shortage of interesting funds that embrace the healthcare sector. For example, this sector accounts for 11.2% of the Brown Advisory US Flexible Equity fund***. In a recent update, the fund’s manager, Maneesh Bajaj, emphasised the importance of the managed care industry within the healthcare infrastructure of the US.

*Source: Macmillan Cancer Support
**Source: Dimension Market Research, 24 April 2024
***Source: fund factsheet, 31 December 2024
****Source: Polar Capital, 5 December 2024

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund managers and do not constitute financial advice.