Mutual Fund Investors Flee Healthcare/Biotechnology Funds

Dating back to third quarter 2015, healthcare/biotechnology sector funds have suffered through ten consecutive months of net outflows. These negative results cover funds in both Thomson Reuters Lipper’s Healthcare/Biotechnology Funds (H) and Global Healthcare/Biotechnology Funds (GH) classifications.  The difference between these two categories is that H funds have greater than 75% of their assets in U.S. stocks, while GH funds have a greater allocation to foreign stocks (between 25% and 75%).  This ten-month losing streak has seen the H and GH classifications shed $6.8 billion and $3.1 billion, respectively. The lion’s share of the overall outflows has taken place during 2016; H and GH are down $4.5 billion and $2.4 billion for the year to date. The size of these outflows is significant, considering that the current total assets under management are just $11.0 billion for H and $3.5 billion for GH. Surprisingly, both groups were coming off long positive streaks (H had 15 consecutive months of net inflows, and GH had 13) before the downturn for each started in September last year.

Within the H classification three mutual funds had net outflows in the $1.5-billion range, accounting for the majority of the negative flows from the group over the ten months. The largest outflows belonged to Fidelity Select Health Care Portfolio, which saw its coffers shrink $1.6 billion. Losing somewhat less were T Rowe Price Health Sciences Fund and Fidelity Select Biotechnology Portfolio; each had net outflows of roughly $1.5 billion.

There were similar results in GH for this timeframe; outflows from three funds represented the majority of the total outflows from the group. Vanguard Health Care Fund recorded the largest outflows (-$1.3 billion), while Janus Global Life Sciences Fund (-$510 million) and Fidelity Select Pharmaceuticals Portfolio (-$446 million) posted similar results.