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HBM Healthcare Investments
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== Summary == HBM Healthcare Investments (HBMN) posted its first NAV loss in a decade for FY22 (ended 31 March), but, as shown in the chart below, its long-term performance record remains very impressive. The recent fall in the share price from a premium to a discount to NAV (10.0% at 20 May) could present an opportunity for long-term investors who, like HBMN’s management team, remain convinced of the long-term opportunities afforded by careful investment in the healthcare and biotechnology space. HBMN is unusual among its peers in offering a portfolio made up of private companies, listed equities and funds, broadly spread by geography and clinical focus, with a high distribution policy (current yield of 3.8%). '''Share price fall could present opportunity given strong NAV record'''<ref>Source: Refinitiv, Edison Investment Research. Total returns in sterling.</ref>[[File:Share price fall could present opportunity given strong NAV record.png|600px]] '''Why invest in healthcare and biotech now?''' In an environment where technology and ‘growth’ stocks in general have sold off heavily, few areas have been hit as hard as biotechnology, the engine of innovation for modern medicine. As in previous cycles, strong returns from biotech companies tend to attract generalist investors, who are then quick to retrench when markets turn down, which can lead to significant short-term volatility. However, the real drivers of long-term growth in biotech are scientific developments and clinical advances, which continue apace, underpinned by technological advances and demographic factors. An allocation to a strategy that includes conservatively valued private investments could help limit some of the NAV volatility seen in other funds. '''The analyst’s view''' HBMN’s strategy has evolved over two decades, but remains founded on identifying promising healthcare and biotech innovators while they are still small, and holding them for the very long term. With 70% of the listed portfolio (37% of the total portfolio) having begun in the private portfolio, it is clear that this is a fund with true private equity roots, although its ability to invest in listed companies as well means it is well placed to capitalise on value opportunities arising from the recent public market sell-off. Over the years, we have seen HBMN’s own valuation appreciate from a persistent double-digit discount to a sustained premium to NAV as investors have become more familiar with the fund’s approach and track record. In Edison Investment Research's opinion, the current 10% discount is unwarrantedly wide compared with a peer group average of 2.7%, particularly given HBMN’s superior performance record.
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