A determination to provide its MPF members with a diverse range of investment options has paid off for Manulife, winning a BENCHMARK Best-in-Class award in the Healthcare Sector.
With more than 1.5 million unique MPF customers, it is clear that many members, when given the opportunity, are choosing Manulife as their preferred MPF service provider. In particular, the company is firmly committed to enriching its MPF platform with a diverse range of investment options – the Manulife MPF Healthcare Fund is an excellent example of this drive for product diversity.
When asked to elaborate on the Fund’s primary attributes and how Manulife’s investment style benefits members, Mindy Perry, Managing Director and Portfolio Manager, pointed out that: “The key thing is that we are long-term investors in the healthcare space and avoid chasing the next fad. Moreover, we seek enduring business models with diverse pipelines.” adding, “Given the pressures on drug pricing, we remain focused on areas of true innovation, such as cancer and chronic diseases which are less sensitive to the threat of drug price decreases.”
“The geographic positioning of the Fund reflects where we see the most attractive opportunities. Historically, this has been in US healthcare names that have strong management teams, opportunities for robust returns and margin sustainability. We also look to invest in regions and healthcare sub-sectors which are facing the lowest price power.”
US Pricing Superiority
Exploring the market more closely, Perry commented that: “The US has traditionally enjoyed the best pricing environment, as it is the only market which maintains a free-pricing environment. US drug prices rise by around 5–10% each year, while prices are regulated down every year in most other countries and territories. Despite Trump’s rhetoric on drug prices, we believe that pricing in the US is still superior to other countries.”
Remaining on the theme of Fund allocation, Perry noted that from a biotech company investment perspective, Manulife adopts a constructive stance, “Most small biotech firms rely on one pipeline drug and therefore have binary return outcomes. We are wary of companies with binary case scenarios as the odds of succeeding are very low. With a focus on quality, we do not want to subject our investors to the volatility and risks that small biotech firms bring.”
A Watchful Eye
Perry also remarked that outside the US, emerging markets are fast growing, with much potential. However, in most of emerging markets, pricing controls that are putting pressure on margins and earnings. “That said, we are keeping a close eye on emerging markets, and if circumstances turn positive we will be among the first to invest in these markets,” she concluded.
“We believe that total healthcare spending will grow at a very high rate over the next few years, and, as such, the healthcare sector will be an attractive place to invest. Of course, it is hard to predict how share prices will behave in the short term, but looking ahead we are confident there will be steady expansion in the market.”
However, the healthcare sector faces some immediate challenges, notable among these is Trump’s recent attack on drug pricing. “On 11 January 2017, President-elect Donald Trump challenged the pharmaceutical industry by criticizing drug pricing. He then proposed a bidding system for Medicare drug pricing.” She continued, “Without specifics, it is unclear on how this would work,” adding, “it is illegal for Medicare to negotiate drug prices directly with the manufacturers. To change the law, Trump will need the support of his fellow Republicans in Congress.”
Perry elaborated on this point by noting that given that Republicans are generally favorable towards the pharmaceutical industry, Trump will have a difficult time gaining the support needed to alter legislation. Moreover, Medicare part D (the only part that government will have a real impact on) represents only 25% of total drug spending.
Actual Drug Prices Increase is Not as Large as it Looks
Exploring drug pricing more closely, Perry explained that there is a misperception that drug price increases are north of 10% each year, “Actually there is a big difference between list price increases and net price increases, or how much increase a drug company can retain in the end. Most of the price ‘increases’ are passed back to the clients in the form of rebates,” continuing with this theme she observed that, “according to the latest figures, even though the average list price increase is about 10%, the actual increase, net of rebate, is only 2.5%. Furthermore, even though brand name drugs have seen consistent prices rises, pharmaceutical spending overall is approximately 15% of total healthcare expenditure.”
Regarding Trump’s plans to repeal Obamacare, which could mean less volume for hospitals and curtail the expansion of Medicaid (which would negatively affect Medicaid managed-care companies), Perry was keen to state that the impact on the Manulife MPF Healthcare Fund would be negligible, as she has zero exposure to these firms. BM
宏利一向堅持為強積金成員提供多元化的投資選擇，公司藉此於今屆《指標》年度基金大獎的行業股票 – 健康科學類別中奪得「同級最佳」大獎。