In-Gene-Ious Investing
Welcome to the new world of genomics-the study of genes. It makes
up one part of the health-sciences investing universe, which
typically includes biotechnology, pharmaceutical, diagnostic,
managed-health-care and medical-equipment companies. And even
though 1999's performance numbers for the 67 mutual funds
making up Lipper's Health/Biotechnology fund category
weren't the hottest around-the average fund in that category
was up 17.44 percent in 1999-long-term shareholders in these types
of funds have, on average, seen the value of their portfolios
increase163 percent over the past five years. (Not to mention,
1,769 percent over the past 15 years.) So there's money to be
made here-provided you know where to look.
Eaton Vance's Worldwide Health Sciences Fund is one of eight
health/biotech funds with a 10-year track record. Since its 1985
inception, it's returned about 18 percent per year to its
shareholders. That places it well ahead of the 10-year performance
records of the average stock funds and S&P 500 funds. Not too
shabby for a fund that holds about 40 securities and invests its
assets worldwide in some of the smallest and largest drug and
research companies on the planet.
"Ninety percent of the market value in pharmaceuticals is
composed of 50 stocks around the world, " says Samuel D.
Isaly, portfolio manager of the fund and founding principal of
OrbiMed Advisors, the firm that manages the fund for Eaton Vance.
"There are another 350 (companies) that make up the remaining
10 percent; they are the small biotechs."
The fund invests a portion of the portfolio in emerging companies
that are still private (less than $100 million) and in companies
with up to $200 billion market capitalization.
Biota was the fund's shining star last year. It's an
Australian company that discovered the flu drug, Relenza. Isaly
bought shares in the company in 1991 and sold them this past year
after the stock had risen 50-fold. Abgenix is one of his current
holdings. "It's in the business of monoclonal antibodies,
which hooks into the stuff called genomics. [Genomics] is the study
of your DNA, which is God's software," Isaly explains. In
the fund's portfolio for three years now, the stock's price
has rocketed from $6.50 to $130 per share.
While international opportunities in the biotechs abound, no one
corner of the world has yet captured Islay's complete
attention. At press time, for example, roughly 70 percent of the
assets in the Worldwide Health Sciences Fund were invested in U.S.
companies. The remaining 30 percent was invested internationally. A
look back to the mid-1990s, however, reveals the situation was just
the opposite. So even though the fund invests for the long-term,
shareholders are likely to see portfolio holdings change as the
opportunities do.
Expect some risk. Investing in small biotech and health-related
companies worldwide can be dicey-lawsuits and fierce competition
can destroy corporate profits. But now that we're living longer
and quality of life is important, investigating the world of health
sciences/biotechnology funds has become a natural next step.
Dian Vujovich is a nationally syndicated mutual fund
columnist and author of 101 Mutual Fund FAQs (Chandler House
Press). For free educational mutual fund information, visit her Web
site, www.diansfundfreebies.com.
At A Glance
- Fund Name: Eaton Vance Worldwide Health Sciences Fund
(ETHSX)
- Managed By: OrbiMed Advisors Inc. for Eaton
Vance.
- Portfolio Manager: Samuel D. Isaly
- Total Assets: $450 million
- Top Holding: Abjenix, Altana AG, Fujisawa, Roach,
Serono, Warner-Lambert
- Average Annual Return: 20.26% for Class A, 20.12% for
Class B (since its inception date in 1985)
- Maximum Load: 5.75% (B and C shares also
available)
- Total Expense Ratio: 1.64% for Class A shares, 2.24% for
Class B shares
- Minimum Initial Investment: $1,000
- Management Fee: 1.1%
- Phone: (800) 225-6265
- Web Site: www.eatonvance.com