the group's early november launch is planned at a time when the markets are weak
Framlington healthcare fund manager Antony Milford is to head up the group's forthcoming Biotech unit trust to be launched in early November.
The group has been considering a biotech play for some time and believes now is the perfect time to bring one out as markets are weak.
Milford said: 'This year biotechs have been beaten up in line with the Nasdaq Index as they have wrongly been put into the same category as technology stocks. Fundamentally there is no correlation between the two, as unlike tech, biotech companies are not affected by the economy.'
In the last seven months there has been some very positive newsflow in the biotech sector with three major announcements of drug deals, including a £1bn deal two weeks ago between the healthcare company Bristol Myers and Imclone, for Imclone's cancer product c225.
Milford said: 'We have been saying for some time that the big pharmaceutical companies were facing a product gap, with a number of drugs going off patent. The pharmaceuticals are getting the new drugs from the biotech companies.
'The fundamentals in the biotech industry are as strong as they have ever been but the valuations are low at the moment in the mid and small cap sectors. With our deep knowledge of biotechs, a lot of it gained through investing in them in the Health fund, we think there are some outstanding opportunities to be gained.'
By November many of these stocks might rally, but Milford believes it is unlikely they will have rallied enough to no longer look attractive.
The fund, which is still subject to FSA approval, is being aimed at investors who can accept greater volatility and is for those who want a pure medium to long-term play on the sector.
Due to its focused investment brief Milford is looking to run around 70 holdings, compared with the 160 in the Healthcare fund. The portfolio will invest globally but 80% is likely to be in the US.
Milford will monitor fund performance against, but not be benchmarked to, the two leading biotech indices, Nasdaq Biotech and Amex.
He said: 'The majority of the companies we will invest in will have products already approved or in the late stage of development which have been proved to be safe. I like to have companies that not only have good products but can develop more in the future.'
Framlington is not expect large inflows into the fund at launch but wants to start building a portfolio track record.
Milford said: 'With markets down many investors have been getting out of these sort of stocks and going more defensive. We think this is the wrong thing to do, the time to go defensive is when everyone loves a sector, not when it is beaten up.
'We are not trying to launch a fund when the sector is sky high. These stocks are not flavour of the month at the moment and are cheap, what we are trying to do is make investors money.'
Over three and five years to 3 September 2001, on an offer to bid basis, Framlington Health is ranked top in the specialist sector, returning 185.86% and 133.91% respectively, compared to the sector average returns of 61.26% and 32.08%.
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