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’.
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.
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%.
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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.
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.
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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.