Polar Capital Healthcare goes immortal with 100% tender and fee cuts

Polar Capital Global Healthcare (PCGH ) has proposed to do away with its ‘fixed life’ and become a permament vehicle, while offering a 100% tender offer, lower fees, and a potentially atttractive portfolio shift.

The £426m investment trust, whose top holdings include Eli Lilly and AstraZeneca, explained the proposals come ahead of the existing requirement to propose liquidating the portfolio at the next annual general meeting (AGM) in early 2026. The investment trust was originally set up in 2010 before being restructured in 2017. 

The plans follow a difficult stretch for healthcare stocks generally. Although, this year’s low returns notwithstanding, PCGH has been the strongest performer in its investment trust sector.

Despite the weaker spell, the board said it had consulted shareholders in recent weeks and found ‘positive appetite’ for the new proposals.

The trust’s overall investment approach won’t be changed, continuing to target long-term capital growth from a diversified range of global healthcare stocks. The key tweak is that, while the majority of assets are expected to remain in large-cap companies, up to 30% may now be allocated to small- and mid-cap firms with market capitalisations below $10bn at the time of investment, versus around 20% in ‘innovation’ companies of a similar size previously. 

The board also proposes to remove the trust’s fixed life structure and replace it with a 100% tender offer to shareholders on or before 31 March 2031 and every five years thereafter.

A full tender will be offered for any shareholders who don’t wish to continue their investment under the new plan. 

Additionally, the performance fee will be removed, and the current management charge of 0.75% per annum – based on the lower of portfolio net asset value (NAV) or market capitalisation – replaced with a tiered structure: 0.7% on the first £500m of assets, and 0.65% on amounts above that.

Over the longer term, PCGH has delivered strong returns, with a five-year shareholder gain of 55.9% versus a 15.1% average loss in the Biotechnology & Healthcare sector tracked by the Association of Investment Companies.

As of yesterday, its share price discount to NAV was about 4%, with the trust confirming it will actively pursue buybacks to manage this figure in today’s update.

Peel Hunt analyst Anthony Leatham commented today that replacing the fixed life with a five-yearly 100% tender offer, alongside improved fee terms, is a ‘sensible’ move for the trust.