AXA Framlington Health Accumulation Units

Healthcare and medical products and services are a vital part of the world economy, particularly in economies with ageing populations. The UK's National Health Service alone employs more than 1.7 million people and spends more than £100 billion each year (Source: NHS). Many global businesses involved in the sector are finally seeing signs of a turnaround after several years of lacklustre returns for investors, and Gemma Game, the fund manager, believes the AXA Framlington Health Fund is positioned to benefit from any upturn in the sector's fortunes.

Given budgetary constraints across many countries, government spending on healthcare is facing increasing scrutiny. Against this backdrop, the fund is positioned in favour of industries that can deliver cost savings and efficiencies. This includes healthcare services companies involved in IT. Companies in this sector such as HMS Holdings and AthenaHealth have been strong performers for the fund this year. Although there is no guarantee this performance will continue.

That is not to say that the fund is exclusively invested in the healthcare services industry. There is also exposure to biotechnology and medical device companies, which are receiving approval from the Food and Drug Administration (FDA) for truly innovative products. They too have been performing well so far this year.

A number of biotechnology stocks have also performed well, such as Alexion, Exelixis and Onyx. Elsewhere, companies in the diagnostic equipment sector have also proven positive. The fund has traditionally had a low exposure to the larger pharmaceuticals sector and this continues to be the case. Gemma Game believes that other industries where there are smaller companies in areas such as biotechnology, healthcare IT, and dialysis could offer superior growth prospects. While this could lead to volatility over shorter periods, she believes it may lead to outperformance over the longer term however smaller companies are higher risk than their larger counterparts. This fund also has the capacity to invest in emerging markets which can increase risk.

After a solid start to the year, the healthcare sector could perform favourably given that valuations remain attractive, and that an ageing population is likely to drive demand for healthcare products. Gemma Game took over the fund at the end of June following the departure of Deane Donnigan. She had been involved with managing the fund since March 2008, and while she has a short track record, it has thus far been good. We would like to see her build on her success over the coming years. The sector specific nature of this fund does increase risk and it should be viewed as a long term investment. It is not currently on the Wealth 150 list of our favourite funds in each sector.