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Sygnia launches health innovation fund

SA investors will have exposure to the global healthcare industry and Oxford Sciences Innovation.
Magda Wierzycka. Image: Supplied

Sygnia Asset Management has had notable success over the past few years with its thematic offerings.

The first was the Sygnia 4th Industrial Revolution Global Equity fund, launched in 2016, followed by the Sygnia FAANG Plus Equity fund in 2018. Last year, it added the Sygnia Oxford Sciences Innovation fund, which provides access to shares of Oxford Sciences Innovation Plc, to its range.

‘These funds have done exceedingly well, and are the fastest growing Sygnia funds,’ said CEO of the Sygnia Group Magda Wierzycka.

Its latest product, she added, is ‘a natural follow on’.

Launch

On Wednesday the firm launched the Sygnia Health Innovation Global Equity fund, which provides South African investors with exposure to the global healthcare industry. This is a sector that has enjoyed particular prominence due to the Covid-19 pandemic.

‘The idea for the fund came about some time ago and it’s a fund we would have launched anyway, but Covid-19 has accelerated trends in the market,’ said Wierzycka.

‘Investors in South Africa don’t have a lot of opportunity to invest in this sector, and the pandemic has accelerated the need for this kind of investing.’

She emphasised that healthcare has established itself as of the most innovative global sectors. This includes advances in areas such as 3D printing of human tissue, genetic sequencing and virtual reality tools that allow surgeons to practice and perfect intricate surgeries.

This fund therefore builds on Sygnia’s focus on disruption and new technologies.

Portfolio

The fund does not track an index, but it is a rules-based portfolio.

‘It only considers developed market equities, and those that are categorised as healthcare companies according to the Global Industry Classification Standard,’ said portfolio manager Monique Davidson. ‘We identify the top 150 companies based on free float-adjusted market capitalisation, and then run all those eligible companies through an ESG (environmental, social and governance) screen.’

This process filters out companies that do not meet a required ESG threshold. The remainder are added to the portfolio, and weighted according to their free float-adjusted market capitalisation.

‘So it’s a similar process to how an index would be constructed,’ said Davidson.

The largest stocks in the portfolio are therefore well-known companies such as Johnson & Johnson, UnitedHealth Group, Roche and Merck.

Initially, 66% of the fund is invested in US-listed equities, with Switzerland having the second highest geographical representation at 9%.

(Click to enlarge)

Innovation

An additional aspect of the fund that differentiates it from a pure healthcare index fund is that it has an allocation to the Sygnia Oxford Sciences Innovation fund. This is initially set at 3% of the portfolio.

‘The Oxford Sciences Innovation Plc was formed five years ago at Oxford University to commercialise intellectual property at Oxford,’ said Wierzycka.

‘It has the right to 25% of every patent produced at Oxford in the past and indefinitely into the future.’

Sygnia is the largest single shareholder in this company through the Sygnia Oxford Innovation fund.

‘These shares are incredibly hard to get, and do not trade,’ said Wierzycka. ‘We wanted to include a small portion of it in this fund to have exposure to this innovation and potential impact, and differentiate this fund from one just investing in an index.’

While the Oxford Sciences Innovation Plc does not exclusively have exposure to healthcare patents, the health sciences are significantly represented in its portfolio. This includes an interest in the firm Vaccitech, which is currently at the forefront of developing a vaccine against the coronavirus.

Details

The Sygnia Health Innovation Global Equity fund aims to out-perform the MSCI World Health Care Net Total Return Index. This index has delivered a gross return of 18% per year in rand terms since 1995.

As the chart below shows, the performance of this index has also diverged significantly from the MSCI World Index over the past seven years.

(Click to enlarge)

The fund is a rand-denominated unit trust portfolio domiciled in South Africa. It utilises Sygnia’s offshore capacity to invest in global markets.

It is offered in two fee classes – either a flat 80 basis point fee, excluding VAT, or a 70 basis point annual fee with a 10% performance fee against the benchmark.

LISTEN: Magda Wierzycka spoke to Ryk van Niekerk in July about the Sygnia OSI Fund’s investment in the Oxford coronavirus vaccine trial


Patrick Cairns is South Africa Editor at Citywire, which provides insight and information for professional investors globally.

This article was first published on Citywire South Africa here, and republished with permission.

COMMENTS   17

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Good News article and am sure the Fund will do well.
There are some positives in small corners of Corp SA, Sygnia is one of them.

Nice product. Pity no ETF available.

Why does it need to be an ETF?

Maybe just read this before you get too carried away – if this is not a ”rand-denominated” fund – beware as you will also be ”wearing” a 100 % exchange rate risk on this investment!

U.S. economy has been mixed. Data showed payroll gains slowing sharply in July, suggesting the pickup in coronavirus cases is putting the brakes on the job market, while service industries expanded at the fastest pace since February 2019. Initial and continuing jobless claims are due later on Thursday.
Goldman Sachs Group Inc. warned investors that a successful coronavirus vaccine might unsettle markets by sparking a sell-off in bonds and rotation out of technology into cyclical stocks.

I hear you and some very important points you make. For me it’s not about the next three to six months, it’s the next three to six years and I’m putting money on it.
The same approach I took with 4IR and FAANG+ get in / got in – early, keep/kept buying, don’t worry about ZAR and short term headlines, the themes are clear and the return is in the theme.

launch a consumer staples fund linked to MSCI World consumer staples

And staying in the rand is safe?

I had a look at the Sygnia OSI fund fact sheet and noticed they levied a high manco fee??
On closer look I also noticed that Magda was the manager.
Surely this is double dipping. Innovation fee plus OSI fee? Add platform fee and not quite the low cost that Sygnia is standing for.
On a closer look I notice Magda is managing OSI fund via Braavos? Magda owns 50% of Braavos? Is that not a conflict??

The OSI fund has a MANCO fee of 1.8%, where on earth do you find a VC fund at under 2%?

Compare that to other general and global equity funds which never beat the index anyway and OSI obviously has better value.

I owned a basket SYGNIA ETF’s (their ITRIX EUROSTOXX5 / FTSE100 / Global Property ETF / MSCI JAPAN) through my TFSA-fund with Easy Equities.

….along with EFT’s in CoreShares & SATRIX.

And when my foreign Dividends from these SYGNIA foreign EFTs are received, I get slapped with hefty “Issuer Portfolio Cost” which were MORE than the dividends itself!!

I thought “oh how charming!”…Okay, that must be how Sygnia does things..”
(never got charged “Issuer Portfolio Fees” with any of my other EFTs with Coreshares or Satrix…despite that a few have offshore indices as well.)

Solution: switched OUT of Sygnia and allocated funds into other providers’ ETFs. My last dealings with Sygnia. Happy.

Thanks for the heads up. I did not realize. I will certainly check this out.

One has to know how a Collective Investment Scheme works to understand that Fee. within the Scheme the Income is set off against most of the expenses, it is actually a really good thing for CIS Investors as the tax loosely mimics a company, and the distribution on a net basis means less income tax payable.
I agree, their way of doing things seem bizarre, yet switching out on this basis alone could be considered bizarre as well.
Look at the performance tables to see if the ETFs are not delivering as expect.
Take care with the difference between a total return ETF and an Income Paying ETF, both have different pros and cons. I prefer getting the dividend and reinvesting into that ETF or a different on, instead of holding a total return ETF and having everything in the Capital price and if then the market tanks everthing goes in one move

I noticed the same with the Sygnia Nasdaq Fund. What a shock to the system. I then switched to the Satrix Nasdaq Fund due to the lower fees.

But who else has a FAANGS ETF I can invest in?

comme ci maybe you should read the article again.
It is a Rand denominated fund.
Sygnia is also working on an eft to be launched asa an index is calculated/approved.
And correct me if Im wrong Sygnia dont charge platform fees iro their funds.

this lady is so dynamic and Proudly South African! We can all be proud of her. A Brilliant example of the Quality we have here in South Africa. Great stuff and you make us proud.

End of comments.

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