Investment policy

The Biotech Growth Trust seeks capital appreciation through investment in the worldwide biotechnology industry.

Investment objective and policy

The Company seeks capital appreciation through investment in the worldwide biotechnology industry.

In order to achieve its investment objective, the Company invests in a diversified portfolio of shares and related securities in biotechnology companies on a worldwide basis.

In connection with the investment policy, the following guidelines apply:

–  The Company will not invest more than 10 per cent., in aggregate, of the value of its gross assets in other closed ended investment companies (including investment trusts) listed on the London Stock Exchange, except where the investment companies themselves have stated investment policies to invest no more than 15% of their gross assets in other closed ended investment companies (including investment trusts) listed on the London Stock Exchange.

–  The Company will not invest more than 15 per cent., in aggregate, of the value of its gross assets in other closed ended investment companies (including investment trusts) listed on the London Stock Exchange.

–  The Company will not invest more than 15 per cent. of the value of its gross assets in any one individual stock at the time of acquisition.

–  The Company will not invest more than 10 per cent. of the value of its gross assets in unquoted investments at the time of acquisition. This limit includes any investment in private equity funds managed by the Portfolio Manager or any affiliates of such entity.

–  The Company may invest or commit for investment a maximum of U.S.$15 million, after the deduction of proceeds of disposal and other returns of capital, in private equity funds managed by the Portfolio Manager, or any affiliates thereof.

–  The Company’s borrowing policy is that borrowings will not exceed 20 per cent. of the value of the Company’s net assets. Any loan facility in place from time to time may be drawn by the Portfolio Manager overseen by the AIFM.

–  The Company may be unable either to invest directly or invest efficiently in certain countries or share classes. In these circumstances, the Company may gain exposure by investing indirectly through swaps or other derivative instruments where it is more efficient to do so. Exposure to underlying investments thus obtained will count towards and be subject to the investment limits set out above.  Further, where the Company invests in via swaps or derivatives for such a purpose, exposure to these financial instruments will count towards and be subject to the limits on the use of derivatives and equity swaps set out below.

–  In line with the Investment Objective, derivatives are employed, when appropriate, in an effort to enhance returns and to improve the risk-return profile of the Company’s portfolio. The Board has set the following limits within which derivative exposures are managed:

·       Derivative transactions (excluding equity swaps) can be used to mitigate risk and/or enhance return and will be restricted to an aggregate net exposure of 5 per cent. of the value of the gross assets measured at the time of the relevant transaction;

Equity swaps may be used for efficient portfolio management purposes and aggregate net counterparty exposure through a combination of derivatives (as set out in the previous bullet point) and equity swap transactions is restricted to 12 per cent. of the value of the gross assets of the Company at the time of the transaction.

Investment approach

The Company‘s assets are managed by OrbiMed Capital LLC (“OrbiMed”). OrbiMed, based in New York, is an investment manager focused exclusively on the healthcare sector, with approximately U.S.$17 billion in assets under management as at 31 March 2023 across a range of funds, including investment trusts, hedge funds and private equity funds. 

OrbiMed has invested the Company’s assets in the worldwide biotechnology industry.

Geographic allocation is in line with the geographic distribution of investment opportunities, with the majority of the Company’s investments in companies based in North America. The portfolio comprised 54 holdings as at 31st March 2023 (2022: 74 holdings).

OrbiMed takes a bottom-up approach to stock selection based on intensive proprietary research. Stock selection is based on rigorous financial analysis, exhaustive scientific review, frequent meetings with company management and consultations with physicians and other industry experts.

OrbiMed looks for strong management teams, healthy organic growth from current products and deep pipelines to fuel future growth.

Risk management is conducted via position size limits and geographic diversification. The Company maintains adequate portfolio liquidity by limiting the Company’s ownership to 15% of an individual company’s equity (at the time of investment) and by strictly limiting the Company’s exposure to unquoted companies to 10% of the portfolio at the time of acquisition. This limit includes any investment or commitment to invest in private equity funds managed by OrbiMed or an affiliate thereof. Investments or commitments to invest in such private equity funds will be limited to U.S.$15m, after the deduction of proceeds of disposal and other returns of capital.