Chart of the Week: Healthcare Fund Flows Mirror the Rocky Road of Healthcare Legislation

Since passage of new healthcare legislation (will they or won’t they?) has dominated this week’s news cycle, I want to review how the uncertainty of the direction of our healthcare system since the start of the presidential election cycle has impacted healthcare mutual funds. The short and quick answer is, not for the good. Since the end of 2015 healthcare funds have suffered net outflows for 69 of the last 71 weeks and have seen their coffers shrink $21.4 billion since the end of 2015. To put this slump in perspective, the group was coming off five consecutive years of positive net flows (+$24.9 billion total) when the slump started in 2016, and the previous largest annual net outflow was $5.4 billion for 2006.

Since the start of 2016 three mutual funds have dominated the net-outflows data for the healthcare funds peer group. Fidelity Select Biotechnology Portfolio, which has been managed by Rajiv Kaul since 2005, has shed over $3.2 billion of assets during the last 15 months. T. Rowe Price Health Sciences Fund is not doing much better, with total net outflows of $3.1 billion during this period; this fund has been managed by Taymour Tamaddon since 2013. Another Fidelity fund, Fidelity Select Health Care Portfolio, placed third worst on the list, with negative flows of $2.2 billion; this fund has been managed by Edward Yoon since 2008. Overall, Fidelity has six mutual funds in the healthcare space, and five of the six are in the red for net fund flows (-$6.2 billion total) since the end of 2015. The only Fidelity fund taking in net new money during this period was Fidelity Select Medical Equipment and Systems Portfolio (+$637 million); this fund is also managed by Edward Yoon.