Market and sector review
Global equities performed strongly in April. The bulk of returns came from more economically sensitive sectors, supported by an improved geopolitical backdrop (consumer discretionary and industrials) and continued investor appetite for the artificial intelligence theme (communication services and information technology).
Healthcare materially underperformed the broader market. Within the sector, managed care, healthcare services, healthcare supplies and healthcare information technology were the strongest performing sub-industries, while healthcare facilities, distributors and equipment had a more challenging month.
April 2026 was dominated by the fallout from the war in the Middle East, with the conflict between the US/Israel and Iran continuing to drive energy markets, inflation expectations and central bank positioning. A two-week ceasefire announced on 7 April pushed oil prices lower and triggered a market rally, but the agreement was temporary and tied to the reopening of the Strait of Hormuz, leaving its durability in doubt.
Against this backdrop, and with oil still well above levels seen two months ago, the IMF used its April World Economic Outlook to cut its 2026 global growth forecast to 3.1% under a "reference forecast". This assumes a limited conflict, warning that rising commodity prices, firmer inflation expectations and tighter financial conditions are testing recent resilience.
The US economy has so far held up (Q1 GDP accelerated to 2% quarter-on-quarter and private sector employment growth came in ahead of expectations). However, the Federal Reserve maintained a hawkish tone, stressing that controlling inflation remains its priority. It is too early to judge whether the US/Israel-Iran conflict will spark a renewed bout of inflation, but if it does, the Fed will once again have to walk a tightrope between containing prices and avoiding undue damage to demand.
During April, several companies within the healthcare sector posted their Q1 financial results. Generally, for those companies that reported, managed care organisations beat low expectations, helped by improving medical cost trends and decelerating utilisation of healthcare services. On the opposite side of the equation, healthcare facilities had a tougher quarter on the back of weaker patient volumes, with results that disappointed the market. Life sciences tools and services also fell short of expectations, reflecting the continued challenging dynamics in the industry, though some companies pointed to leading indicators turning positive, notably equipment orders. Pharmaceuticals and healthcare equipment were mixed, while biotechnology continues to trade off M&A activity and clinical trial readouts.
Fund performance
The Company’s net asset value (NAV) increased by 2.3% in April, ahead of its benchmark, the MSCI All Country World Daily Net Total Return Health Care Index, which was down 3.2% (both figures in sterling terms).
The earnings season has been broadly positive, pipeline news flow continues to highlight the high levels of innovation
Positive relative contributors relative to the benchmark in April were Centene, Teva Pharmaceutical Industries (Teva) and CVS Health.
US managed care company Centene has had a strong start to the year, citing increased visibility and good progress with its Medicaid and Medicare businesses. All of this offered enough confidence to raise the earnings outlook for FY26.
Teva’s positive contribution was driven by a strong operational start to the year, with a pipeline that not only remains on track but also surprised the market by announcing an acquisition that was well received. On the same day as the results, Teva announced it has entered a definitive agreement to acquire Emalex Biosciences for $700m in cash, with a further $200m on future milestones and royalties. The acquisition adds a late-stage pipeline asset for the treatment of Tourette’s Syndrome, an area that aligns well with Teva’s existing commercial footprint.
CVS Health moved up in sympathy with the managed care group, with strong results across the company’s peers.
Negative relative contributors in the period under review included UnitedHealth Group, Elevance Health and Hansa Biopharma.
UnitedHealth Group and Elevance Health were underweights relative to the benchmark during the month, with both performing strongly off the back of strong 1Q26 financial results. As a collective, US managed care companies are starting to show green shoots of recovery after a period of inflated medical cost trends.
Hansa Biopharma struggled in April, following an underwhelming 1Q26 sets of results. However, management provided reassurance that key development timelines remain on track.
We initiated a position in US managed care company UnitedHealth Group during the month. The primary drivers of the investment decision were its valuation and a view that the company had adopted a conservative posture with its guidance across most of the company’s business lines. We also exited the position in Belgian pharmaceuticals company UCB. It continues to execute operationally but is entering a period that looks light on clinical and commercial catalysts.
Outlook
April was extremely challenging for healthcare on a relative basis, with geopolitical unrest in the Middle East and the market’s preference for AI/technology subsectors key factors. Importantly, however, the earnings season has been broadly positive, pipeline news flow continues to highlight the high levels of innovation, and a number of healthcare subsectors are starting to look very oversold.
