The Biotech Growth Trust - Valuations starting to improve with more to come

The Biotech Growth Trust (BIOG) has two experienced managers, Geoff Hsu and Josh Golomb, at leading global healthcare specialist OrbiMed. They remain very positive on the outlook for the biotech sector, believing that industry valuations became disconnected from positive industry fundamentals during a period of elevated interest rates. BIOG’s strategy favours emerging (smaller-cap) over large-cap biotech companies, as, while aggregate risks are higher, they can be more than outweighed by superior returns. This strategy has proved successful over the longer term, but was detrimental to the trust’s performance between Q121 and Q323. Investor focus is starting to return to company fundamentals but Hsu and Golomb also believe that when the US Federal Reserve starts to cut interest rates, it should be a positive catalyst for small-cap stocks, including those of emerging biotech companies.