2015 Investment Trust Awards: Best Larger Trust

Winner: Biotech Growth

Biotechnology shares have enjoyed four storming years, and the Biotech Growth trust has made the most of its opportunities, with its net asset value (NAV) per share more than trebling.

With a portfolio of just 35 holdings it can hurt if one of them stumbles, as happened last year.

However, BIOG's NAV returns were only just behind the Nasdaq Biotechnology index over 12 months and well ahead over three years.

Managed Geoffrey Hsu of New York-based OrbiMed Advisors says short-term relative returns can also suffer if BIOG is not exposed to a significant takeover target.

The sector is rife with mergers and acquisition activity because the major pharmaceutical and biotech companies are all competing to add new drugs to their product range, and smaller biotech companies are the main source.

As a result, emerging biotech firms are typically taken over within a few years of launching their first product or approaching profitability.

With over 150 initial public offerings in the biotech sector over the past couple of years, there are plenty of potential takeover candidates out there, and OrbiMed has appointed an additional biotech analyst to ensure full coverage of its investment universe.

Around a third of BIOG is invested in emerging biotechs, with most of the rest in larger and more mature biotech companies. Hsu says the latter still offer '"compelling value".

The trust's share price gains over the past couple of years have been largely matched by annual earnings growth of around 20%.

As a result it trades at around 15 times estimated 2016 earnings, putting it on a similar price/earnings ratio to the average large US pharmaceuticals company, where earnings growth is typically half as good. Emerging biotechs are harder to value and Hsu says some look overvalued, but others remain attractive.

Highly Commended: TR Property

TR Property has been progressively more rewarding in each of the past three years. With assets of nearly £1.1 billion, it is unique in offering exposure to pan-European real estate securities plus a modest exposure to directly managed UK property.

It targets long-term capital growth and an attractive yield, and has raised its dividend by an average annual rate of 15% over the last decade, to give a current yield of 3.5%.

Around 40% of assets are in UK-quoted shares headed by large diversified companies such as Land Securities Group and Hammerson, and 52% is in European equities headed by Unibail-Rodamco, Europe's largest property company.

Directly held properties in London and south-east England account for the rest.

Marcus Phayre-Mudge has been lead manager since April 2011, having worked closely with his predecessor since 1997.

With UK commercial property values responding well to the growth of the UK economy and the search for yield, and European property companies benefiting from ultra-low base rates, he is sufficiently optimistic to have 10% gearing in place.

He says the trust's progressive yield attracts investors, but so does its exposure to "real assets".

Highly Commended: Worldwide Healthcare

Worldwide Healthcare performed almost as well as BIOG over the past 12 months, and retains its highly commended rating. Like BIOG, it is managed by OrbiMed, and the two trusts hold many of the same biotech companies, but WWH is more diversified.

On a sector basis, around a quarter of its assets are in big pharmaceutical companies and it also has exposure to areas such as medical technology and medical services.

Geographically, whereas 90% of BIOG's holdings are US-based, WWH's US exposure is 65%, with 16% in Europe and the rest in Asia and emerging markets. As a result it has been less dynamic over the past three years, but also less volatile.

OrbiMed's founder Sam Isaly has managed WWH since launch in April 1995. He believes the outlook for the healthcare sector is as good as ever, and he expects the trust to maintain the 15% annual growth in NAV it has achieved since launch. As a result WWH is around 15% geared.

Isaly says tailwinds for the healthcare sector include the quickening pace of both technological advance and drug approvals, and the opening up of areas such as molecular diagnostics.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.